The green taxonomy is primarily a classification system to clarify which economic activities can be considered environmentally sustainable. The EU Taxonomy provides a framework to define when a company operates in ways benefiting society and the environment, thus limiting greenwashing and creating a level playing field for sustainable investing.
The EU Taxonomy Regulation applies to the following three groups:
- Companies with more then 500 employees that fall under the Non-Financial Reporting Directive (NFRD)
- Players in the financial sector including occupational pension providers that offer offer and distribute financial products in teh EU, even if they are based outside the EU
- EU and member states institution when setting public measures, standards or labels for green financial products and corporate bonds
Requirements for companies from outside and within the financial sector differ, though some companies may fall into both categories.