EU Taxonomy

The EU Taxonomy is a classification system established by the European Union that defines which economic activities can be considered environmentally sustainable. Its primary purpose is to direct capital flows towards green investments and prevent greenwashing. The taxonomy sets out six environmental objectives: climate change mitigation, climate change adaptation, sustainable use of water and marine resources, transition to a circular economy, pollution prevention and control, and protection of biodiversity and ecosystems.

For an economic activity to qualify as "taxonomy-aligned", it must make a substantial contribution to at least one of the six objectives, do no significant harm (DNSH) to any of the others, and meet minimum social safeguards based on the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Technical screening criteria define the specific thresholds and conditions for each activity.

CSRD-obligated companies must disclose the share of their turnover, capital expenditure (CapEx), and operating expenditure (OpEx) that is taxonomy-eligible and taxonomy-aligned. This taxonomy disclosure is an integral part of the sustainability report under ESRS E1 (climate change). For financial market participants, the taxonomy is also relevant for defining sustainable investment products under the Sustainable Finance Disclosure Regulation (SFDR).