EU Taxonomy

Regulation (EU) 2020/852, known as the Taxonomy Regulation, establishes a framework to facilitate sustainable investment. It aims to create a ‘green list’ of environmentally sustainable economic activities.

The Taxonomy was concieved as an investment tool that would facilitate sustainable investment by identifying and defining, through the use of scientific criteria, activities that qualified as sustainable. Use of the Taxonomy is largely voluntary however, pursuant to Article 8 of the Taxonomy Regulation, entities currently covered by the Non Financial Reporting Directive (NFRD – currently under revision as per the proposal for a Corporate Sustainability Reporting Directive) are required to disclose the taxonomy eligibility and alignment of their business activities, or that of their investments in the case of financial institutions. To specify further details and requirements, the Commission has put forward several Delegated Acts, such as the Article 8 Delegated Act, the Climate Delegated Act, and the yet to be published Complementary Delegated Act. Moreover, the Platform on Sustainable Finance has made proposals for an Extended Environmental Taxonomy as well as a Social Taxonomy.