EU Taxonomy

EU Taxonomy

Central to the EU’s net-zero drive, this taxonomy allows a standardized classification of 170 economic activities according to scientific criteria. For an activity to be considered “taxonomy aligned,” it must contribute to at least one of the six environmental objectives:

1. Climate change mitigation (the impact of an organization on the environment)
2. Climate change adaptation (the impact of the environment on the organization)
3. Use and protection of water and marine resources
4. Transition toward a circular economy
5. Pollution prevention and control
6. Protection and restoration of biodiversity and ecosystems

Also, to be classified as sustainable according to the EU Taxonomy, an activity mustn’t violate any of the previously mentioned environmental objectives, and it needs to meet the minimum safeguards such as the UN Guiding Principles on Business and Human Rights.

From January 2023, select companies are required to assess how their activities perform against the taxonomy criteria and disclose these results publicly. The EU Taxonomy is mandatory for:

• Large, public-interest companies already subject to NFRD (Non-Financial Reporting Directive)
• Companies that are not presently subject to NFRD, meeting two out of three CSRD criteria: i) 250+ employees; ii) net turnover of at least €40 million; iii) balance sheet of at least €20 million
• Listed SMEs
• Financial market participants, including occupational pension providers, that offer financial products in the EU