The EU taxonomy for sustainable activities (ie. “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. Investments are judged by six objectives

• climate change mitigation
• climate change adaptation
• the circular economy
• pollution
• effect on water
• and biodiversity

The taxonomy came into force in July 2020. The taxonomy is seen as the most comprehensive and sophisticated initiative of its type; it may inspire other countries to develop their own taxonomies or may indeed become the world’s ‘gold standard’. However when the disclosure regime came into effect in January 2022 there were still huge gaps in data and it may be several years before it becomes evident whether it will be effective. The UK is working on its own separate taxonomy.

Links

• EU taxonomy for sustainable activities
• Frequently asked questions: How should financial and non-financial undertakings report taxonomy-eligible economic activities and assets in accordance with the Taxonomy Regulation Article 8 Disclosures Delegated Act?