EU taxonomy

At a glance

In March 2018 the European Commission published its action plan: financing sustainable growth. Action 1 of the Commission’s action plan calls for the establishment of an EU classification system for sustainable activities, or Taxonomy.

The EU Taxonomy is a list of economic activities with performance criteria for their contribution to six environmental objectives:

I. climate change mitigation
II. climate change adaptation
III. sustainable use and protection of water and marine resources
IV. transition to a circular economy, waste prevention and recycling
V. pollution prevention and control
VI. protection of healthy ecosystems

Taxonomies are used in the investment industry and are demonstrated to help drive capital towards sustainability objectives. To be included in the proposed EU Taxonomy, an economic activity must contribute substantially to at least one environmental objective and do no significant harm to the other five, as well as meet minimum social safeguards.

The European Commission followed through on this action in May 2018 with a proposal for a regulation on the establishment of a framework to facilitate sustainable investment (taxonomy regulation).

In addition, a technical expert group on sustainable finance (TEG) was set up by the European Commission in July 2018 to assist in with the implementation of four key actions of the action plan, including the development of an EU taxonomy.

On 18 June 2019, the TEG published its . The report sets technical report on EU taxonomy out the basis for a future EU taxonomy in legislation.

The report contains:

– technical screening criteria for 67 activities across 8 sectors that can make a substantial contribution to climate change mitigation
– a methodology and worked examples for evaluating substantial contribution to climate change adaptation
– guidance and case studies for investors preparing to use the taxonomy

Call for feedback

The TEG report on EU taxonomy is accompanied by a call for feedback which was held from 3 July until 16 September 2019.

Stakeholders were invited to provide feedback on the proposed climate change mitigation activities, climate change adaptation principles and criteria, usability of the proposed taxonomy and future development of the taxonomy.

In the autumn 2019, the TEG will analyse the responses and advise the Commission on how to take the feedback forward.

More info: TEG report on EU taxonomy, Commission action plan on financing sustainable growth