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Tools of Sustainable Finance
EU taxonomy for sustainable activities
The EU Taxonomy is a critical component of the EU’s sustainable finance framework, designed to support the European Green Deal and the EU’s climate targets for 2030 and 2050. It is a classification system that defines criteria for economic activities that are environmentally sustainable, helping to direct investments towards the sectors most crucial for achieving a net-zero trajectory by 2050 and broader environmental goals.
The need for a common language and clear definitions of what constitutes "sustainable" is essential to meeting the EU's climate and energy targets. The EU Taxonomy provides this by offering a standardized framework that financial and non-financial companies can use to classify economic activities as environmentally sustainable. This standardization helps prevent greenwashing, provides clarity for investors, and supports the scaling up of sustainable investments across the EU.
The Taxonomy Regulation which entered into force on 12 July 2020., lays the foundation for the EU Taxonomy. It sets out four overarching conditions that an economic activity must meet to be considered environmentally sustainable. The European Commission is responsible for defining the technical screening criteria for each environmental objective through delegated and implementing acts.
The Taxonomy's Role in Practice
To support the practical implementation of the EU Taxonomy, the European Commission has developed the EU Taxonomy Navigator, an educational and user-friendly tool that includes:
Find out more about the EU taxonomy navigator
Policy Making Timeline
Key milestones in the development and implementation of the EU Taxonomy include:
Relevant Legislation
This framework and its tools aim to guide and accelerate sustainable investments, ensuring they align with the EU’s long-term environmental goals.
The need for a common language and clear definitions of what constitutes "sustainable" is essential to meeting the EU's climate and energy targets. The EU Taxonomy provides this by offering a standardized framework that financial and non-financial companies can use to classify economic activities as environmentally sustainable. This standardization helps prevent greenwashing, provides clarity for investors, and supports the scaling up of sustainable investments across the EU.
The Taxonomy Regulation which entered into force on 12 July 2020., lays the foundation for the EU Taxonomy. It sets out four overarching conditions that an economic activity must meet to be considered environmentally sustainable. The European Commission is responsible for defining the technical screening criteria for each environmental objective through delegated and implementing acts.
The Taxonomy's Role in Practice
To support the practical implementation of the EU Taxonomy, the European Commission has developed the EU Taxonomy Navigator, an educational and user-friendly tool that includes:
- EU Taxonomy Compass: A visual guide to sectors, activities, and criteria included in the Taxonomy delegated acts.
- EU Taxonomy Calculator: A step-by-step guide to help companies meet their reporting obligations.
- FAQs Repository: A collection of common questions and answers about the Taxonomy.
- EU Taxonomy User Guide: A non-expert guide to understanding the Taxonomy.
Find out more about the EU taxonomy navigator
Policy Making Timeline
Key milestones in the development and implementation of the EU Taxonomy include:
- 21 November 2023: Publication of a Delegated Act in the Official Journal, outlining economic activities that contribute to objectives such as sustainable use and protection of water, transition to a circular economy, pollution prevention, and biodiversity protection. These amendments clarify reporting obligations and expand the list of activities contributing to climate change mitigation and adaptation. The new rules will apply from January 2024.
- 17 October 2023: Launch of the EU Taxonomy stakeholder request mechanism.
- October 2022 - October 2024: Second mandate of the Platform on Sustainable Finance, continuing the work of advising the Commission on sustainable finance matters.
Relevant Legislation
- Taxonomy Regulation (2020/852/EU): The foundational legislation establishing the criteria and framework for the EU Taxonomy.
This framework and its tools aim to guide and accelerate sustainable investments, ensuring they align with the EU’s long-term environmental goals.
