In recent years, the European Union has made significant progress in promoting sustainability through the capital market.
A crucial step in this direction was the European action plan for sustainable finance, published in 2018 by the European Commission. This plan aims to orient the capital market towards a model of sustainable, inclusive development aligned with the commitments ofParis climate agreement.
{summary #bullet -1}
What is European Taxonomy?
One of the fundamental measures introduced by the plan is the creation of a EU taxonomy clear and detailed.
The EU taxonomy is a classification system that determines if an economic activity can be considered environmentally sustainable. This is a solid tool based on scientific criteria and data, based on the opinion of group of technical experts (TEG) on sustainable finance.
The target is to allow investors to accurately identify and evaluate investment opportunities that meet the EU's environmental criteria. This classification aims to counteract the Greenwashing and to promote investments that really contribute to environmental sustainability.
{summary #bullet -2}
How does the EU Taxonomy work and what are the 6 environmental objectives
The European taxonomy defines the criteria for identifying environmentally sustainable economic activities. To be considered sustainable, an economic activity must contribute significantly to at least one of the 6 environmental objectives established by the Taxonomy:
- mitigation of climate change;
- adaptation to climate change;
- sustainable use and protection of water and marine resources;
- transition to a circular economy;
- pollution prevention and control;
- protection and restoration of biodiversity and ecosystems.
In addition, the activity must comply with “Do No Significant Harm” (DNSH) principle, that is, it does not compromise any of the other five objectives, and must respect the minimum criteria for safeguarding human and social rights, according to international guidelines.
{summary #bullet -3}
How the EU Taxonomy relates to SFDR and CSRD regulations
The EU taxonomy is closely interconnected with the Regulation on the disclosure of sustainability information in the financial services sector (SFDR) and the Directive on corporate sustainability reporting (CSRD). These regulations work in synergy to create a regulatory framework that facilitates transparency And the traceability sustainable investments.
SFDR: this regulation requires companies in the financial sector to provide detailed information on their products in terms of sustainability. In particular, investments must be classified according to their level of alignment with ESG criteria, according to specific articles (Articles 6, 8 and 9) that indicate the level of sustainability.
Here, the EU Taxonomy acts as a fundamental reference for determining if an investment can be considered sustainable, helping to prevent greenwashing phenomena.
CSRD: with the introduction of this directive, a greater number of companies are obliged to disclose non-financial information, in particular those relating to sustainability. The EU Taxonomy provides the necessary framework for reporting this information, ensuring that companies can demonstrate their commitment to sustainability in a clear and verifiable way. This not only facilitates regulatory compliance, but also increases investor and stakeholder confidence.
{summary #bullet -4}
Conclusions
For businesses, adoption and alignment with EU taxonomy represent a fundamental step not only to access sustainable financing, but also to strengthen your standing on the market and contribute concretely to the transition to asustainable economy.
Contact us and find out how we can help your company start its sustainability journey.
