Everything you need to know about the Taxonomy regulation

Entry into force

Entry into force on 12 July 2020. Since 1 January 2022, certain companies have been required to publish sustainability indicators under the Taxonomy Regulation.

What is the green Taxonomy?

This is EU Regulation 2020/852 of the European Parliament and of the Council of 18 June 2020 (known as the Taxonomy Regulation) establishing a framework to facilitate sustainable investment.

This new regulation establishes a single classification system aimed at transparently distinguishing "green" investments from other investments. It complements EU Regulation 2019/2088 (Sustainable Finance Disclosure Regulation) on sustainability disclosure in the financial services sector.

More specifically, the Taxonomy Regulation sets out the criteria for determining whether an economic activity is an environmentally sustainable investment. Sustainable investment is an investment approach that aims to integrate environmental, social and governance (ESG) factors into investment decisions in order to better manage risk and generate sustainable returns over the long term.

What are the six environmental objectives of the green Taxonomy?

The six objectives included in the EU Taxonomy Regulation are as follows:

1. Climate change mitigation

2. Climate change adaptation

3. Sustainable use and protection of water and marine resources

4. Transition to a circular economy, including waste prevention and recycling

5. Pollution prevention and control

6. Prevention and restoration of biodiversity and ecosystems

What is a green activity according to the green Taxonomy?

An economic activity is said to be ecologically sustainable when it:

• Contributes substantially to one or more of the six environmental objectives,

• Does not significantly harm any of the other objectives,

• Observes minimum social safeguards (human rights, etc.).

If an activity meets these three conditions, it is said to be "aligned" with the Taxonomy. Specific criteria have been defined by the European Union to demonstrate the substantial contribution and the absence of significant negative impact.

The Taxonomy Regulation does not yet cover all economic activities.

What are the Taxonomy requirements for companies?

The Taxonomy concerns certain listed and unlisted companies, which have been required to publish sustainability indicators since 1 January 2022. A delegated regulation published by the European Commission on 6 July 2021 sets out the content, calculation methods and presentation of these indicators: EUR-Lex - 32021R2139 - EN - EUR-Lex (europa.eu).

For the 2024 financial year, companies must report the full set of eligible and aligned indicators for all activities under the six environmental objectives.