To promote sustainable investment, the Taxonomy Regulation (Regulation (EU) 2020/852) establishes a European Union-wide classification system to identify economic activities that are considered sustainable.
What is the aim of EU taxonomy
The EU taxonomy would provide companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable.
What is the EU taxonomy and how will it work in practice
An EU Taxonomy is indispensable in making the EU climate targets implementable in practice.
It is a classification system that enables categorization of economic activities/sectors that play key roles in climate change mitigation and adaptation.
What are the pillars of the EU Taxonomy
The six environmental objectives of the Taxonomy are: (1) climate change mitigation, (2) climate change adaptation, (3) sustainable use and protection of water and marine resources, (4) transition to a circular economy, (5) pollution prevention and control, and (6) protection and restoration of biodiversity and
What is the objective of EU taxonomy
The EU taxonomy for sustainable activities (i.e. “green taxonomy”) is a classification system established to clarify which investments are environmentally sustainable, in the context of the European Green Deal.
The aim of the taxonomy is to prevent greenwashing and to help investors make greener choices.
What is EU taxonomy regulation
The Taxonomy Regulation establishes an EU-wide classification system or ‘framework’ intended to provide businesses and investors with a common language to identify to what degree economic activities can be considered environmentally sustainable.
Why is the EU taxonomy important
The taxonomy provides the right tools to direct investments towards more sustainable projects and activities – both through incentives and will.
It will encourage market participants to invest differently and thus prove the power of free markets.
WHO reports EU taxonomy
EU Taxonomy regulation applies to companies subject to non-financial reporting. Based on current rules3, large listed companies will have to disclose to what extent the activities they carry out meet the criteria.
This applies to companies with more than 500 employees during the financial year.
When did EU taxonomy enter into force
The EU taxonomy regulation entered into force in 2020 and covers companies with more than 500 employees.
The EU Taxonomy points out three groups of primary taxonomy users: Financial market participants, offering financial products and services within the EU, including occupational pension providers.
What is the EU social taxonomy
The EU developed the social taxonomy to facilitate social investments to help the bloc achieve its sustainable development goals and create the social internal market set out in the Treaty on European Union (Article 3).
When did the EU taxonomy start
The Climate Delegated Act entered into force on 1 January 2022. The EU Taxonomy Compass also includes the contents of the Complementary Delegated Act, as published in the Official Journal on 15 July 2022.
The Complementary Delegated Act will enter into force on 1 January 2023.
What does the EU taxonomy mean for companies
The Taxonomy is a classification system for organisations to identify which of their economic activities, or the economic activities they invest in, can be deemed ‘environmentally sustainable’.
What is an Article 8 product
Article 8 products are those which promote environmental or social characteristics and which integrate sustainability into the investment process in a binding manner.
Does the UK follow the EU taxonomy
The UK government will focus on net-zero in the UK context, building upon international taxonomies and taking the “scientific metrics in the EU taxonomy as its basis”.
The EU Taxonomy – what is it proposing? As part of its European Green Deal, the EU Commission adopted the Taxonomy Regulation 2020/852 in June 2020.
What is EU Taxonomy alignment
Taxonomy alignment therefore refers to an eligible economic activity that is making a substantial contribution to at least one of the climate and environmental objectives, while also doing no significant harm to the remaining objectives and meeting minimum standards on human rights and labour standards.
Is the EU taxonomy finished
The taxonomy is not finished. To be deemed green, an activity must substantially contribute to one of six environmental aims and not harm the other five.
So far, the rules cover two aims – fighting climate change, and adapting to its impacts.
Criteria for the others will follow this year.
What information should be provided under the EU taxonomy regulation
Together, the Taxonomy and Disclosure Regulations will require firms to disclose the degree of environmental sustainability of funds and pension products that are promoted as environmentally friendly, and include disclaimers where they do not (articles 8 and 9 of the Disclosure Regulation).
Is EU taxonomy legally binding
A core component is the EU Taxonomy Regulation 2020/852 (“Taxonomy Regulation”): This includes a uniform and legally binding classification system in order to classify economic activities as environmentally sustainable (= Taxonomy-aligned) activities.
What does EU taxonomy mean for banks
The EU Taxonomy Regulation is a 2020 piece of EU law which introduced a classification system setting out the criteria for recognising economic activities as environmentally sustainable.
What is the difference between Article 8 and Article 9
‘ Article 8 and Article 9 products consider sustainability in a binding way. In addition, Article 8 products promote social and or environmental characteristics and Article 9 products have a sustainable objective.
Products which do not meet either the definition of Article 8 or Article 9 are classified as ‘other.
What makes an article 8 fund
An Article 8 Fund under SFDR is defined as “a Fund which promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices.”
Which sectors are covered by EU taxonomy
What is the EU Taxonomy? The criteria are developed for economic activities in sectors such as agriculture, manufacturing, electricity, transportation, buildings and communications.
The first EU Taxonomy disclosures apply from January 1st 2022.
How many companies are affected by EU taxonomy
Approximately 11,500 real economy companies in the EU, which are required to submit a non-financial statement in accordance with the Non-Financial Reporting Directive (NFRD), must now also report the proportion of their expenditures that comply with the taxonomy.
What are Article 8 or 9 funds
These are: Article 9 funds: those funds that specifically have sustainable goals as their objective (for example investing in companies whose goal it is to reduce carbon emissions).
Article 8 funds: those funds that promote E or S characteristics but do not have them as the overarching objective.
Does EU taxonomy apply to banks
We see the Taxonomy as a sustainable finance tool not only for asset managers but also for banks, as we can play an important role in financing the transition to a low carbon economy.
What is an Article 8 ESG fund
The vast majority of strategies at Robeco will be classified as Article 8. These are funds which form part of our Sustainability Inside range, which has ESG integrated as standard, or the Sustainability Focused range, which has more specific targets, such as achieving a lower carbon footprint than the benchmark.
Is agriculture included in the EU taxonomy
Agriculture stays out of the EU Taxonomy Delegated Act for sustainable activities – so far.
On 21 April 2021 the European Commission adopted an ambitious ‘Sustainable finance package’ to re-direct investments towards more sustainable activities across the EU.
What is the UK taxonomy
The Taxonomy is a common framework that sets out a clear understanding of which activities can be classified as sustainable, in order to help support investment in sustainable projects by allowing investors to make informed choices.
What is not significant harm EU taxonomy
‘Do No Significant Harm'(DNSH) For an activity pursuing one or more of the six objectives to qualify as sustainable it cannot cause significant harm to any of the other Taxonomy objectives.
For each activity, the TSC lay out thresholds to define compliance with do no significant harm.
Is Sfdr part of EU taxonomy
The Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation (EUT) are cornerstones of the EU’s Sustainable Finance Strategy.
While the regulations have entered into force, their reporting requirements and to which financial institutions (and advisors) they apply to and by when are still in flux.
Who does the taxonomy apply to
There are three main groups EU taxonomy rules apply to: Financial market participants, including occupational pension providers, offering financial products in the EU; Large companies which are required to report under the Non-Financial Reporting Directive (NFRD), which is set to be revised by the CSRD; and.
References
https://news.globallandscapesforum.org/40996/40996-what-is-sustainable-finance/
https://www.matheson.com/docs/default-source/sustainable-finance/165_sfdr-factsheet–specific-requirements-for-article-9-dark-green-funds.pdf?sfvrsn=76522b9d_4
https://novisto.com/understanding-esg-metrics-definition-examples/
https://www.theia.org/sites/default/files/2020-08/EU%20Commission%20review%20of%20NFRD%20final%20draft%20%20%282%29.pdf
https://www.thenewdivision.world/taxonomy
