The European Commission recently released a comprehensive set of Frequently Asked Questions (FAQs) to assist investors and companies in implementing the EU Taxonomy, a classification system that defines environmentally sustainable economic activities. This initiative aims to enhance the usability of the EU’s sustainable finance framework and alleviate administrative burdens for companies.
The EU Taxonomy is integral to the EU Action Plan on Sustainable Finance. It specifically provides a standardized framework to identify economic activities that significantly contribute to one or more of six environmental objectives without causing substantial harm to others. These objectives encompass climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.
The newly published FAQs hence offer technical clarifications on various aspects of the EU Taxonomy, including:
The EU Taxonomy initially came into effect in 2022, focusing on climate change mitigation and adaptation. As of January 2024, it expanded to include the remaining four environmental objectives. This reinforced the EU’s commitment to directing investments toward sustainable projects and activities in line with the European Green Deal.
The European Commission aims to facilitate the practical application of the EU Taxonomy through these clarifications. This effort promotes transparency and consistency in sustainable finance across the European Union.
