The EU Taxonomy is a regulatory classification tool that helps investors, companies and financial institutions to define environmentally sustainable economic activities. It sets standardized requirements under which conditions corporate activities can be considered sustainable. The taxonomy does not ban investments in activities not labelled “green”, but it limits which ones companies and investors can claim as climate-friendly.
The EU Taxonomy climate delegated act came into force on 1 January 2022. It is an additional disclosure requirement for companies already required to provide a nonfinancial statement under the Non-Financial Reporting Directive.
What is the content and scope of the EU Taxonomy?
The development of the EU taxonomy relies on input from experts from across the economy and civil society. To facilitate the use of the taxonomy, the European Commission created an IT tool – the taxonomy compass. It lists performance indicators (technical screening criteria) that help to categorize whether an economic activity can be considered sustainable.
Currently, the technical screening criteria are focused on two environmental objectives, that are considered to have the largest impact regarding potential reductions in emissions, namely climate change mitigation and climate change adaptation. Technical screening criteria for the other four environmental objectives will be published in 2022.
How does the EU Taxonomy define sustainable activities?
According to the EU Taxonomy a sustainable activity needs to fulfil the following criteria.
A. Contributing substantially to at least one of the six environmental objectives and not doing any significant harm to any of the other ones:
- Climate change mitigation
- Climate change adaptation
- Sustainable and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
B. Further, the economic activity must comply with minimum social safeguards.
Nuclear and gas included in the Taxonomy
End of 2021, after significant debate between member states, the European Commission approved specific nuclear and gas energy activities in the list of economic activities covered by the EU taxonomy. As a result, both sources are now labelled green for investment purposes.
Until then nuclear and gas had been excluded due to concerns regarding the safe disposal of nuclear waste and the carbon footprint of gas. Now, however, in absence of other economically feasible alternatives, the Commission has recognised both energy sources as transitional economic activities that can contribute to accelerate the Union’s path towards net-zero by 2050 without locking in innovation and investments in alternative energy sources.
How DFGE can help
The EU taxonomy is a complex challenge for companies. “Large companies of public interest” with more than 500 employees must report how sustainable they operate and how business activities affect the environment, climate and social issues.
At the DFGE we support companies to prove their business activities for their climate impact, to collect climate-relevant data and to coordinate the analysis process along internationally recognized standards such as GRI.
For more information on EU taxonomy, GRI and ESG take a look at the DFGE solutions. If you have further questions, please contact us via or by phone at +49 8192-99733-20.
Sources
Nuclear and Gas Included in the EU Taxonomy — CSR Europe
EU taxonomy for sustainable activities | European Commission (europa.eu)
Nachhaltige Finanzierung | EU-Kommission (europa.eu)
Nachhaltige Finanzierung | EU-Kommission (europa.eu)
Nachhaltige Finanzierung | EU-Kommission (europa.eu)
