EU Taxonomy Regulation
Governmental Agency: European Commission
Jurisdiction: European Union
Ref no: (EU) 2019/2088
Status: IN REVIEW
In order to meet the EU’s climate and energy targets for 2030 and reach the objectives of the European Green Deal, investments must be directed towards sustainable projects and activities. In order to do so, a common language and a clear definition of what is ‘sustainable’ is necessary - in essence a common classification system for sustainable economic activities.
In July 2020, the EU Taxonomy Regulation entered into force. It establishes the basis for the EU taxonomy by setting a number of overarching conditions that an economic activity has to meet in order to qualify as environmentally sustainable, for example:
- It contributes substantially to one or more specified environmental objectives (climate change mitigation & adaption; sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and ecosystems)
- Does not significantly harm any of the specified environmental objectives
- Is carried out in compliance with the Regulation's minimum social safeguards (e.g. UN Guiding Principles on Business and Human Rights and International Bill of Human Rights)
The Regulation plays an important role in helping the EU scale up sustainable investment, by creating security for investors, protecting private investors from greenwashing, helping companies become more climate-friendly and mitigating market fragmentation.
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"There will be a number of impacts to businesses through the Regulation:
- Businesses will need to consider the Regulation as part of corporate environmental reporting.
- Alignment with the necessary requirements can support ""green"" reputation and so potential access to investment. By extension, the Taxonomy will support decision-making on investment.
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