The European Commission has unveiled a new set of FAQs aimed at aiding investors in the application of the EU Taxonomy.
According to ESG Today, this move is designed to simplify the use of the Taxonomy and reduce the administrative efforts required by companies to align with the EU’s sustainability mandates.
Introduced as part of the EU Action Plan on Sustainable Finance, the EU Taxonomy serves as a classification system that identifies economic activities contributing to environmental objectives without significantly harming others. These objectives encompass climate change mitigation and adaptation, sustainable use of water and marine resources, transition to a circular economy, pollution prevention, and the protection of biodiversity and ecosystems.
With the Taxonomy becoming effective in 2022, it initially focused on the first two objectives under the EU Taxonomy Climate Delegated Act. The full scope, including the additional four objectives, came into force at the beginning of 2024, as outlined in the Environmental Delegated Act. The newly published FAQs address critical areas such as general Taxonomy requirements, the system’s compatibility with the Corporate Sustainability Reporting Directive (CSRD), and specific verification protocols. They also clarify technical screening criteria for activities linked to all six environmental objectives and outline reporting obligations under both the Climate and Environmental Delegated Acts.
Mairead McGuinness, commissioner for Financial Services, Financial Stability and Capital Markets Union, emphasized the utility of the EU Taxonomy in providing a unified framework for understanding the environmental impacts of investments. “The EU Taxonomy provides investors with a common understanding of the environmental impacts of their investments while guiding companies’ sustainable transition efforts. Our focus now is to improve the usability of the framework and these FAQs will help companies as they apply the Taxonomy,” she noted.
The Commission’s efforts to enhance the practical application of the Taxonomy are part of a broader strategy to integrate sustainability into the financial sector, ensuring that capital flows towards more sustainable economic activities.
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