TAXONOMY: AN EU INITIATIVE TO PROMOTE SUSTAINABILITY IN THE FINANCIAL SECTOR

To overcome  the comprehensive threats of climate change and  environmental degradation, Europe has adopted the Green Deal as a new strategy to promote growth while reducing greenhouse gases emissions and protecting the environment. As part of the effort to make EU's economy sustainable, a new regulatory framework was set to facilitate sustainable investments,  helping the financial market to adjust to these challenges and to foster private capital flows towards sustainable investments.

What is Taxonomy

Taxonomy is the EU Classification system for sustainable activities .

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

Environmental Objectives 

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 

How it works 

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

  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 

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.

WHO HAS TO DO WHAT ?

Financial Market Participants 

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

  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:

  1. The proportion of turnover aligned with the Taxonomy 

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

IMPLEMENTATION TIMELINE 

December  31 2020

Financial Market Participants 

Technical screening criteria for climate change mitigation and adaptation 

June 31 2021

Non- financial companies

Technical screening criteria for climate change mitigation and adaptation 

December 31 2021 

Financial Market Participants 

Technical screening criteria for other environmental objectives  

Disclosure in relation to climate change mitigation and adaptation in periodic reports, pre-contractural disclosures and on websites

Non- financial companies

Disclosure for activities related to climate change mitigation and adaptation covering financial year of 2021

December 31 2022

Financial Market Participants 

Disclosure in relation to  all environmental  objectives in periodic reports, pre-contractural disclosures and on websites

Non- financial companies

Disclosure for activities related to all environmental objectives covering the financial year of 2022

We  will connect you to the best experts so you get your assessment based on EU Taxonomy .

Get to know our services or get in touch with us for further information. 

 It is important to recognize that taking longer-term sustainability interests into account makes economic sense and does not necessarily lead to lower return for investors 

OMNIA GmbH

contact@viridad.eu

+49 89 20190191

Sternstraße 1

85622 Feldkirchen (Munich)

Germany

logo white.png