EU taxonomy Regulation

Actions being taken by the EU to develop a classification system for sustainable activities across the EU.

What the EU is doing and why

The EU taxonomy is an essential instrument for achieving market transparency and a fundamental component of the EU’s framework for sustainable finance. In accordance with the goals of the European Green Deal, it enables investments to be directed towards those economic activities that are the most essential for the transition. The taxonomy is a classification system that establishes criteria for economic activities that are consistent with a trajectory of net zero emissions by the year 2050 as well as the broader environmental goals that go beyond climate change.

It is absolutely necessary for us to allocate investments towards sustainable projects and activities if we wish to accomplish the climate and energy targets set for the EU in 2030 as well as the objectives of the European green deal. In order to accomplish this goal, it is necessary to have a common language as well as a precise definition of the term “sustainable”.

 This is the reason why the action plan on funding sustainable growth advocated for the adoption of a standard classification system for sustainable economic activity, which was referred to as a “EU taxonomy”.

The EU taxonomy makes it possible for financial and non-financial businesses to agree on a single definition of economic activities that meet the criteria for being ecologically sustainable.

In this way, it plays an important role in helping the EU scale up sustainable investment, by creating security for investors, protecting private investors from greenwashing, helping companies become more climate-friendly and mitigating market fragmentation. 

The Taxonomy Regulation entered into force on 12 July 2020. It establishes the basis for the EU taxonomy by setting out the 4 overarching conditions that an economic activity has to meet in order to qualify as environmentally sustainable. 

Under the Taxonomy Regulation, the Commission had to come up with the actual list of environmentally sustainable activities by defining technical screening criteria for each environmental objective through delegated and implementing acts.

Why do we need an EU Taxonomy?

The purpose of the EU Taxonomy aims to help in increasing investments in projects and activities that are required to accomplish the goals of the European Green Deal, which is our plan to make the economy of the EU environmentally sustainable by adhering to the following principles and goals:

1. It creates a frame of reference for investors and companies;
2. It supports companies in their efforts to plan and finance their transition;
3. It protects against greenwashing practices;
4. It helps accelerate financing of those projects that are already sustainable and those needed in the transition.

How can Global PCCS support ?

Global PCCS helps organisations that fall under the scope of Corporate Sustainability Reporting Directive CSRD to report in their annual reports to what extent their activities are covered by the EU Taxonomy (Taxonomy-eligibility) and comply with the criteria set in the Taxonomy delegated acts (Taxonomy-alignment).

Which further helps investors, civil society organisations, consumers and other stakeholders to evaluate the sustainability performance of companies

For more information on the service please book a free consultation by filling the form or writing to us at  pooja.h@globalpccs.com