The EU taxonomy explained: 18 facts to get you up to speed on the EU Taxonomy Regulation
1. The taxonomy is one of ten measures in the EU Action Plan on Sustainable Finance.
2. The Sustainable Finance Disclosure Regulation and Standards and Labels for green financial products (such as green bonds) are examples of other measures in this action plan.
3. The taxonomy is a way of classifying business activities as sustainable or less/non-sustainable.
4. The existing taxonomy deals with six environmental targets and addresses the industries that can create the greatest positive impact and potential for reducing the greatest negative impacts on these targets.
5. The six targets are (i) climate change mitigation, (ii) climate change adaptation, (iii) water and marine resources, (iv) circular economy, (v) pollution and (vi) ecosystems and biodiversity.
6. In addition, the taxonomy focuses on minimum social safeguards.
7. The taxonomy says that for an activity to be sustainable, it has to contribute substantially to at least one of the environmental targets, do no significant harm to any of the other targets and comply with minimum social safeguards.
8. The thresholds for substantially contributing or doing no significant harm are defined by technical screening criteria for each of these activities.
9. So far, the taxonomy has only concluded on the technical screening criteria for the climate change mitigation part and the climate change adaptation part.
10. These criteria make up the so-called Climate Delegated Act, an appendix (to be very specific, it consists of two appendices) to the taxonomy.
11. The other environmental targets will get their own delegated act (the so-called Environmental Delegated Act) with the technical screening criteria related to the last four environmental objectives. The technical screening criteria for this are currently open for feedback from all stakeholders before being concluded in December 2021.
12. To be as concrete as possible, the taxonomy has defined about 90 of the most important activities that could reduce climate change.
13. If you have a company involved in these activities, your activities are eligible for the taxonomy.
14. If the way you perform these activities satisfies the criteria defined for this activity, your activities are aligned with the taxonomy.
15. You're measured on your share of your revenue, CAPEX and OPEX that are derived from or eligible and aligned activities
16. The taxonomy does not require you to comply with the technical screening criteria. It just requires you to be transparent and report on your performance.
17. The taxonomy applies to financial market participants and all listed companies with more than 500 employees (companies subject to NFRD) from January 1 2022, requiring companies to report on their share of eligible activities.
18. From January 1, 2023, these companies have to report on their share of aligned activities.