The EU Taxonomy is a classification tool determining which economic activities are considered environmentally sustainable. It was created to address greenwashing, and it functions as a common framework for investors and companies who want to make sustainable financial investments. When you report on the Taxonomy, you must understand how your business operations are or are not aligned with the objectives of this EU framework.
The EU Taxonomy is a classification system for sustainable economic activities across the EU. It defines some criteria for sustainable investments. Therefore, the Taxonomy functions as a common language of how to define and discuss sustainability in economic activities. The EU Taxonomy came into force in July 2020 and has since become a cornerstone in the sustainable finance framework used in the EU.
The classification system was established to clarify which economic activities the EU considers environmentally sustainable. The foundation for the Taxonomy can however be traced back to the European Green Deal, which was launched in 2019. It set forth climate initiatives that were in line with the 2016 Paris Agreement goals. The overarching objective of the Green Deal is for the EU to be a carbon neutral economy by 2050.
This makes sustainable finance one of the main pillars of the Green Deal, which influenced the need and implementation of the EU Taxonomy. There was and still is a need for the private sector to join the push for a green transition. This makes it essential for investors to prioritize sustainable investments and divert their investments accordingly. One way of achieving this is through regulatory frameworks. The Taxonomy provides such guidelines that investors can use to identify investments that are sustainable and in line with the regulatory requirements.
Businesses and investors should use the EU Taxonomy framework as guidance towards environmentally responsible activities. If you are looking for business opportunities across green finances or want to improve your competitive advantage and brand reputation, you should understand the EU Taxonomy.
The Taxonomy outlines a transition of capital flows towards sustainable investment. The aim is to address and prevent greenwashing by helping investors make informed, economically sustainable decisions. Thus, it standardizes what qualifies as a sustainable economic activity, in addition to promoting transparency and consistency across the market. This is outlined in six different objectives.
The objectives of the Taxonomy pave the way for investors to make informed green investments choices and understand financial risk components. The Taxonomy intends to integrate Environmental, Social, and Governance (ESG) factors into broader business strategies, which businesses and investors define. The regulations will help businesses to define, achieve, and communicate their own sustainable objectives.
By effect, they are also measurable, which is a key point to why the EU Taxonomy was established. The framework sets forth some requirements that the business must comply with, but that they also can use to base and assess their own economic activities and efforts on.
In the CEMAsys software, you can write EU Taxonomy reports that are perfectly aligned with the regulatory requirements. The EU Taxonomy module makes the process intuitive, while ensuring that it is performed methodically correctly. It helps you to assess how aligned you are with the ESG criteria and to calculate financial KPIs.
The EU Taxonomy allows financial and non-financial companies to share a common definition of economic activities that can be considered environmentally sustainable. This is relevant across the public sectors and for businesses and investors who operate in the banks and the financial markets.
As the Taxonomy provides insights into financial risks, it also mitigates the chance of greenwashing. It helps direct investments to be made based on what will impact the transition to net zero emissions the most.
Summarized, the EU Taxonomy helps the EU in scaling up sustainable investment by creating security for investors and protecting them from greenwashing. It also helps companies to become more climate-friendly and mitigate market fragmentation.
EU companies must report against the objectives that are set forth in the Taxonomy. In practice, this results in a three-step process of reporting.
Then you must assess whether your businesses activities are aligned with the reporting requirements. In essence, you must measure your activities based on 4 factors set forth by the framework.
An activity is aligned with the EU Taxonomy if:
When you know whether you are sufficiently aligned or not, you can report on the necessary financial KPIs. These are turnover, CapEx, or OpEx, and you must include a percentage of the total turnover, CapEx, and OpEx in the EU Taxonomy report. The KPIs must be linked to EU Taxonomy-aligned activities.
The EU Taxonomy is closely connected to the CSRD and SFDR. These work together to direct investments toward activities aligned with the guidelines set by the Taxonomy. The classification set forth by the Taxonomy applies within the CSRD and SFDR as well.
The CSRD mandates that companies include a section for disclosures related to the EU Taxonomy. It is aligned with the Taxonomy and reports on sustainability performance using EU Taxonomy metrics.
The pre-contractual and periodic disclosure required by the SFDR also refers to the Taxonomy. Article 8 and 9 in the SFDR define how financial products are classified based on their sustainability objectives. These are defined by the Taxonomy.
All these frameworks are interconnected and are designed to streamline sustainable investing practices. They are all fostering transparency among businesses and are deployed with the intention of making it easier for investors to make informed and accountable decisions.
Explore further: The different ESG reporting frameworks
Whether a company is subject to the EU Taxonomy presently, depends on the guidelines scoped in the CSRD. Explore how to report on CSRD and stay compliant with both CSRD and the Taxonomy.
Navigate the EU Taxonomy with our cloud-based system that has integrated functionalities that are aligned with the regulatory requirements. The software provides an easy step-by-step solution for the reporting process, which makes the actual process of writing your EU Taxonomy report much more streamlined. We are of course also ready to assist you if you need some guidance while writing the report.
The EU Taxonomy is a classification system for sustainable economic activities across the EU. It defines some criteria for sustainable investments. Therefore, the Taxonomy functions as a common language of how to define and discuss sustainability in economic activities. The EU Taxonomy came into force in July 2020 and has since become a cornerstone in the sustainable finance framework used in the EU.
The classification system was established to clarify which economic activities the EU considers environmentally sustainable. The foundation for the Taxonomy can however be traced back to the European Green Deal, which was launched in 2019. It set forth climate initiatives that were in line with the 2016 Paris Agreement goals. The overarching objective of the Green Deal is for the EU to be a carbon neutral economy by 2050.
This makes sustainable finance one of the main pillars of the Green Deal, which influenced the need and implementation of the EU Taxonomy. There was and still is a need for the private sector to join the push for a green transition. This makes it essential for investors to prioritize sustainable investments and divert their investments accordingly. One way of achieving this is through regulatory frameworks. The Taxonomy provides such guidelines that investors can use to identify investments that are sustainable and in line with the regulatory requirements.
Businesses and investors should use the EU Taxonomy framework as guidance towards environmentally responsible activities. If you are looking for business opportunities across green finances or want to improve your competitive advantage and brand reputation, you should understand the EU Taxonomy.
The Taxonomy outlines a transition of capital flows towards sustainable investment. The aim is to address and prevent greenwashing by helping investors make informed, economically sustainable decisions. Thus, it standardizes what qualifies as a sustainable economic activity, in addition to promoting transparency and consistency across the market. This is outlined in six different objectives.
The objectives of the Taxonomy pave the way for investors to make informed green investments choices and understand financial risk components. The Taxonomy intends to integrate Environmental, Social, and Governance (ESG) factors into broader business strategies, which businesses and investors define. The regulations will help businesses to define, achieve, and communicate their own sustainable objectives.
By effect, they are also measurable, which is a key point to why the EU Taxonomy was established. The framework sets forth some requirements that the business must comply with, but that they also can use to base and assess their own economic activities and efforts on.
In the CEMAsys software, you can write EU Taxonomy reports that are perfectly aligned with the regulatory requirements. The EU Taxonomy module makes the process intuitive, while ensuring that it is performed methodically correctly. It helps you to assess how aligned you are with the ESG criteria and to calculate financial KPIs.
The EU Taxonomy allows financial and non-financial companies to share a common definition of economic activities that can be considered environmentally sustainable. This is relevant across the public sectors and for businesses and investors who operate in the banks and the financial markets.
As the Taxonomy provides insights into financial risks, it also mitigates the chance of greenwashing. It helps direct investments to be made based on what will impact the transition to net zero emissions the most.
Summarized, the EU Taxonomy helps the EU in scaling up sustainable investment by creating security for investors and protecting them from greenwashing. It also helps companies to become more climate-friendly and mitigate market fragmentation.
EU companies must report against the objectives that are set forth in the Taxonomy. In practice, this results in a three-step process of reporting.
Then you must assess whether your businesses activities are aligned with the reporting requirements. In essence, you must measure your activities based on 4 factors set forth by the framework.
An activity is aligned with the EU Taxonomy if:
When you know whether you are sufficiently aligned or not, you can report on the necessary financial KPIs. These are turnover, CapEx, or OpEx, and you must include a percentage of the total turnover, CapEx, and OpEx in the EU Taxonomy report. The KPIs must be linked to EU Taxonomy-aligned activities.
The EU Taxonomy is closely connected to the CSRD and SFDR. These work together to direct investments toward activities aligned with the guidelines set by the Taxonomy. The classification set forth by the Taxonomy applies within the CSRD and SFDR as well.
The CSRD mandates that companies include a section for disclosures related to the EU Taxonomy. It is aligned with the Taxonomy and reports on sustainability performance using EU Taxonomy metrics.
The pre-contractual and periodic disclosure required by the SFDR also refers to the Taxonomy. Article 8 and 9 in the SFDR define how financial products are classified based on their sustainability objectives. These are defined by the Taxonomy.
All these frameworks are interconnected and are designed to streamline sustainable investing practices. They are all fostering transparency among businesses and are deployed with the intention of making it easier for investors to make informed and accountable decisions.
Explore further: The different ESG reporting frameworks
Whether a company is subject to the EU Taxonomy presently, depends on the guidelines scoped in the CSRD. Explore how to report on CSRD and stay compliant with both CSRD and the Taxonomy.
Navigate the EU Taxonomy with our cloud-based system that has integrated functionalities that are aligned with the regulatory requirements. The software provides an easy step-by-step solution for the reporting process, which makes the actual process of writing your EU Taxonomy report much more streamlined. We are of course also ready to assist you if you need some guidance while writing the report.
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