The EU taxonomy has been developed to serve as a classification system to outline and specify sustainable economic activities. By offering guideline and appropriate definitions on sustainable activities to companies and investors, it is expected to reduce greenwashing, increase transparency and enable help shifting and allocating investments to sustainable activities.
Therefore, the EU taxonomy can be seen as the effort to develop a common language and clear definition of which activities are to be classified as sustainable. Reaching a common understanding is a key cornerstone to direct investments towards sustainable projects and activities that will help achieving the EU’s climate and energy targets for 2030 and the objectives of the European Green Deal.
The EU Taxonomy defines technical screening criteria for economic activities which:
Make a substantive contribution to one of six environmental objectives:
- Climate change mitigation
- Climate change adaption
- Sustainable and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
Do not significant harm to the other five
Meet minimum safeguards such as the OECD Guidelines on Multinational Enterprises and the UN Guiding Principles on Business and Human Rights
To develop the EU Taxonomy within the framework of the underlying Taxonomy Regulation, the European Commission established a Technical Expert Group (TEG) on sustainable finance. On 9 March 2020, the TEG published its final report on the EU Taxonomy, with recommendations on the design of the EU Taxonomy, implementation guidance and specific technical screening criteria to assess activities with regard to their sustainability contribution.