EU Taxonomy

The EU Taxonomy defines criteria for determining the environmental sustainability of economic activities. These criteria are intended to guide informed investment decisions and assess the sustainable value of an investment. The classification system established by the taxonomy provides companies with a uniform basis for evaluating the environmental sustainability of economic activities. This enhances transparency regarding the sustainability of companies’ operations and combats greenwashing.

The Taxonomy Regulation applies to all companies covered by the Corporate Sustainability Reporting Directive (CSRD) and those subject to the Sustainable Finance Disclosure Regulation (SFDR).

The EU Taxonomy assessment system

The EU taxonomy defines six environmental objectives, which form the basis of the classification system:

1. Climate protection
2. Adaption to climate change
3. Sustainable use and protection of water and marine resources
4. Transition to a circular economy
5. Prevention and reduction of pollution
6. Protection and restoration of biodiversity and ecosystems 

The EU Commission has issued delegated acts for all six environmental objectives in order to define technical assessment criteria that specify the conditions. Delegated acts also list all economic activities that are taxonomy-compliant and can be assessed for taxonomy conformity, i.e. environmental sustainability.

For an economic activity to be considered environmentally sustainable, the Taxonomy Regulation (Article 3) requires that:

• a substantial contribution is made to at least one of the six environmental objectives,
• no significant harm is caused to any of the other environmental objectives,
• minimum social and governance safeguards are adhered to, and
• the technical screening criteria are met.

The individual technical assessment criteria that are taken into account under the EU taxonomy will be introduced step-by-step. Companies that are subject to the taxonomy do not have to fully disclose the technical assessment criteria for environmental objectives 3 - 6 until 2025. For 2024, only the proportion of taxonomy-eligible and non-taxonomy-eligible economic activities must be disclosed. This gradual introduction applied to environmental objectives 1 and 2 in 2022. Since 2023, companies subject to taxonomy are obliged to fully disclose the technical assessment criteria. 

The technical assessment criteria are reviewed by the EU Commission at least every three years and adapted to scientific and technological developments.