EU-TAXONOMY: AN EU REGULATION 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 has been set to help the financial market adjust to these challenges, and to direct capital flows towards sustainable activities.

What is EU-Taxonomy

EU-Taxonomy is the EU Classification system for sustainable activities .

It is a tool for determing the environmental performance of economic activities across a wide-range of industries, which helps investors, companies, issuers and project promoters navigate toward a low-carbon, resilient and resource-efficient economy.

 

EU-TAXONOMY IS YOUR GUIDE TO FINDING 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 

EU-Taxonomy sets requirements that economic activities must meet in order to be considered sustainable. It sets performance thresholds for economic activities that:

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

  2. Do no significant harm (DNSH) to any of the other environmental objectives; and

  3. Comply with minimum safeguards.

Why use EU-Taxonomy? 

EU-Taxonomy provides clarity and transparency on environmental sustainability criteria, thereby enabling investors, financial institutions, and companies to use informed decision-making to foster investments in environmentally-sustainable activities and to encourage capital flows towards sustainable investments.

STAKEHOLDER RESPONSIBILITIES

Financial Market Participants 

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

  1. How and to what extent they have used EU-Taxonomy for determining the sustainability of underlying investments for their products.

  2. The proportion of underlying investments that are taxonomy eligible and aligned, expressed as a percentage of the total investment, fund or portfolio.

  3. Details on the respective proportions of enabling or transition activities.

Non-financial Companies 

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

  1. The proportion of turnover eligible and aligned with the EU-Taxonomy. 

  2. Whether or not Capex, and if relevant, Opex, is eligibile and aligned with Taxonomy.

 

IMPLEMENTATION TIMELINE 

December 31 2020

Financial Market Participants 

Technical screening criteria for climate change mitigation and adaptation 

June 4 2021

Non-financial companies

Technical screening criteria for climate change mitigation and adaptation 

January 2022

Financial Market Participants 

Information on rules and methodology on disclosure obligation

Non-financial companies

Information on rules and methodology on disclosure obligation

January 1 2022

Financial
Market Participants 

Disclosure of Taxonomy eligibility

Non-financial companies

Disclosure of Taxonomy eligibility

January 1 2023

Non-financial companies

Disclosure of Taxonomy alignment

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Taking longer-term sustainability interests into account makes economic sense and does not necessarily lead to lower returns for investors.