What is the EU Taxonomy again?

The EU Taxonomy Regulation is a classification system for environmentally sustainable economic activities. It basically provides the definition of what can be called "sustainable" using a set of criteria.

The EU Taxonomy's framework identifies six core environmentally sustainable objectives.

1. Climate change mitigation  
2. Climate change adaptation  
3. Water
4. Pollution
5. Biodiversity
6. Circularity

If you need a refresher, check out our EU Taxonomy article.

The remaining 4

The definition of the first 2 environmental objectives where published back in 2021. On June 13th 2023, the Commission adopted the remaining 4. Note that adoption means that it has not been officially published yet.

Although the remaining 4 have far fewer business activities than the initial 2, the scope is broader, meaning more businesses will be eligible to have eligible or aligned activities.

What this means for you

The EU taxonomy is rapidly becoming the EU standard to define sustainable business activities. For investors (SFDR) and for companies (CSRD) it is clear that sustainability already has severe business implications that will only intensify in the future. It is therefore important to understand what is coming.

We can help you identify your EU taxonomy Eligibility, including the Taxo4. For each company/investment, you identify the business activities and match them with the most suitable EU taxonomy activity and environmental objective.

After that, you want to demonstrate EU taxonomy Alignment using the technical screening criteria.

This is a 3-step process, for each business activity:

1. Demonstrate your Substantial Contribution Criteria (SCC) for one of the 6 environmental objectives
2. Prove you Do Not Significantly Harm to the 5 other others
3. Satisfy the Minimum Social Safeguards.

And Done ✅.

If you satisfy all steps you can call your business activity "Sustainable" according to the EU standard.

Fineprint

The details for these remaining four objectives are laid out in the following four Annexes to the Delegated Act:

1. Annex I: Sustainable use and protection of water and marine resources
2. Annex II: Transition to a circular economy
3. Annex III: Pollution prevention and control
4. Annex IV: Protection and restoration of biodiversity and ecosystems.  

The Commission has also approved amendments to the Taxonomy Climate Delegated Act, which addresses the environmental objectives of climate change mitigation and adaptation, and to the Taxonomy Disclosures Delegated Act. These changes are heavily influenced by the recommendations of the Platform on Sustainable Finance, published in both March and November of 2022.

The formal adoption of these texts in all the official languages of the European Union will take place later on (after the four-month scrutiny period, as explained in the video), as soon as the language versions are available.