EU Taxonomy Regulation

The EU Taxonomy Regulation is a framework created by the European Union (EU) to help transition to a low-carbon, sustainable economy. It provides a classification system for economic activities that can be considered environmentally sustainable.

The taxonomy is meant to serve as a tool for investors, businesses, and policymakers to identify and promote sustainable economic activities. It defines six environmental objectives:

• Climate change mitigation
• Climate change adaptation
• Sustainable use and protection of water and marine resources
• Transition to a circular economy
• Pollution prevention and control
• Protection and restoration of biodiversity and ecosystems.

The taxonomy also specifies criteria for economic activities to be considered environmentally sustainable, based on their contribution to these objectives. These criteria include quantitative and qualitative measures such as greenhouse gas emissions, energy efficiency, and waste reduction.

The regulation applies to all EU member states and financial market participants, including banks, insurance companies, and investment firms.

They are required to disclose the proportion of their investments that align with the taxonomy criteria, and the extent to which they are supporting sustainable economic activities.

Overall, the EU Taxonomy Regulation is a significant step towards promoting sustainable economic activities and combating climate change.