The Taxonomy Regulation entered into force on 12 July 2020. In this way, it plays an important role in helping the EU scale up sustainable investment, by creating security for investors, protecting private investors from greenwashing, helping companies become more climate-friendly and mitigating market fragmentation.
The EU taxonomy allows financial and non-financial companies to share a common definition of economic activities that can be considered environmentally sustainable. This is why the action plan on financing sustainable growth called for the creation of a common classification system for sustainable economic activities, or an “EU taxonomy”. To achieve this, a common language and a clear definition of what is ‘sustainable’ is needed. In order to meet the EU’s climate and energy targets for 2030 and reach the objectives of the European green deal, it is vital that we direct investments towards sustainable projects and activities. The taxonomy is a classification system that defines criteria for economic activities that are aligned with a net zero trajectory by 2050 and the broader environmental goals other than climate. It helps direct investments to the economic activities most needed for the transition, in line with the European Green Deal objectives. The EU taxonomy is a cornerstone of the EU’s sustainable finance framework and an important market transparency tool.
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