EU taxonomy
The EU taxonomy, a core part of the European Green Deal, classifies sustainable activities to steer investments into green innovations. It supports the EU goals for climate neutrality by 2050 and the significant reduction of emissions by 2030 by providing guidelines for sustainable investments. Activities must contribute to one of six environmental goals without causing significant damage, in accordance with the “Do No Significant Harm” principle, and comply with social standards. The goals focus on climate protection, adaptation, water use, circular economy, prevention of pollution and biodiversity.
The EU taxonomy is a classification system developed under the European Green Deal to identify and promote sustainable economic activities. The taxonomy aims to direct capital flows into projects that contribute to achieving climate neutrality by 2050. It is legally anchored in Regulation (EU) 2020/852 and ensures that companies and financial market participants must report on their environmentally sustainable activities. These activities must make a substantial contribution to at least one of the six defined environmental objectives, such as climate protection, adaptation to climate change, sustainable use of water resources, promotion of the circular economy, prevention of pollution, and protection of biodiversity.
The EU taxonomy promotes transparency in financial markets by defining clear criteria for sustainable investments, thereby reducing the risk of greenwashing. By introducing minimum standards concerning social criteria, such as respect for human rights, the taxonomy further supports sustainable capital use. Companies that fall under the equality standards of the Corporate Sustainability Reporting Directive (CSRD) are required to disclose their taxonomy-compliant activities. This leads to a noticeable realignment of investment flows and helps to identify economic activities that truly contribute to ecological and social sustainability. Overall, the EU taxonomy plays a crucial role in the transformation towards a resource-efficient and low-emission economy in Europe.
