EU Taxonomy and sustainable investments
The EU Taxonomy is a framework for investment in sustainable projects and activities in the EU which will help the EU reach its 2030 energy and climate targets.
The EU Taxonomy system classifies economic activities that are deemed sustainable according to the Taxonomy Regulation and delegated acts criteria. Within these criteria, 6 environmental objectives have been established.
1. Climate change mitigation
2. Climate change adaptation
3. The sustainable use and protection of water and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. The protection and restoration of biodiversity and ecosystems.
For economic activities to be classified as sustainable they must make substantial positive contributions to these objectives. Screening criteria were developed to define activities considered sustainable and assign minimum contribution requirements for objectives related to a certain activity. On top of this, activities must “do no significant harm” to the remaining objectives not related to that activity.
By classifying the sustainability of certain economic activities the EU taxonomy makes investment in priority activities more attractive by increasing security, helps policy makers define what constitutes environmentally sustainable activities, and emphasizes environmental, social and governance (ESG) considerations in long-term investments.
Sustainable finance is essentially the channeling of private investment into projects that develop climate change resilience, aid climate-neutrality goals, promote equitable economies, and supports public investment. Without the support of private investment, public money is insufficient in many cases to achieve necessary green development targets.
As yet, the UK does not have a green taxonomy since leaving the EU. Plans to produce a UK Taxonomy have been delayed until 2023. We’ll be sure to alert you as the situation develops, so watch this space.
If you or your company are looking to invest in environmentally sustainable activities as part of an ESG strategy or any other sustainability strategy, contact us to see how we can help.