Global/EU-Taxonomy
Sustainable Finance Taxonomy Regulation

Six environmental objectives

The taxonomy defines six environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.

Technical screening criteria

For each objective, a set of specific technical screening criteria is established. These criteria determine whether an economic activity can be considered "sustainable" in the context of that objective. These include factors like:

1. Do No Significant Harm (DNSH) principle: The activity should not significantly harm any of the other environmental objectives.
2. Substantial contribution: The activity should make a significant contribution to at least one environmental objective.
3. Minimum safeguards: The activity needs to meet minimum social and governance safeguards.

The EU Sustainable Finance Taxonomy is still under development and being updated gradually. It is currently used by various regulations and initiatives within the EU's Sustainable Finance Framework, impacting both public and private actors involved in sustainable investments.

The EU taxonomy regulation primarily impacts the following entities:

• EU companies - Large public interest companies with over 500 employees must disclose the taxonomy alignment of their activities in non-financial reporting.
• Financial companies - Banks, insurers, investors, asset managers must disclose the taxonomy alignment of their offerings and portfolios marketed as environmentally sustainable in the EU.

• Member states - Expected to use the taxonomy as a reference when setting policies, incentives and standards that promote sustainable investment and reporting.
• Standard setters - Need to integrate taxonomy criteria into relevant standards and frameworks on sustainability reporting and disclosures.
• Data providers - Must incorporate taxonomy alignment data into ESG research, ratings, tools and analytics.
• Verifiers - Will be responsible for independently auditing taxonomy disclosures made by companies.
• Non-EU companies - Exporters into the EU and subsidiaries of non-EU companies operating in the EU will need to provide taxonomy-aligned data.
• EU regulators - Oversee implementation across sectors, review taxonomy alignment disclosures, and take enforcement action where necessary.