What is Taxonomy

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Taxonomy is the EU Classification system for sustainable activities .

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It is a tool to define the environmental performance of economic activities  across a wide range of industries, helping  investors, companies, issuers and project promoters to navigate to a low-carbon, resilient and resource-efficient economy.

GUIDE TO A CREDIBLE SCIENCE-BASED PATHWAY TO BECOME CLIMATE NEUTRAL

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Environmental Objectives 

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1. Climate change mitigation

2. Climate change adaptation 

3. Protection of water and marine resources 

4. Transition to a circular economy

5. Pollution prevention  and control

6. Protection and restoration of biodiversity and ecosystems 

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How it works 

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Taxonomy set requirements that activities must meet to be considered sustainable. It sets performance thresholds for economic activities which:

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1. Can make substantial contribution to at least one of the six environmental objectives

2. Do no significant harm (DNSH) to any of the objectives 

3. Comply with minimum safeguards 

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Why use Taxonomy 

It provides clarity and transparency on environmental sustainability  criteria to investors, financial institutions and companies. It enables thereby informed decision-making to foster investments in environmental sustainable activities and to foster private capital flows towards sustainable investments.

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Financial Market Participants 

Financial Market Participants offering financial products in EU have, for each relevant product, to provide information on:

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1. How and to what extent they have used Taxonomy in determining the sustainability  of underlying investments.

2. To what environmental objectives the investments contribute and the proportion of under lying investments that are taxonomy aligned, expressed as a percentage of  the investment, fund or portfolio.

The disclosure should include details on the respective proportions of enabling and transition activities

Non-financial Companies 

Non-financial companies already required to provide a non-financial statement under the Non-Financial Reporting Directive are required to provide a description of how and to what extent their activities are taxonomy aligned, including:

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1. The proportion of turnover aligned with the Taxonomy 

2. Capex, and if relevant, opex aligned with Taxonomy

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