The EU Taxonomy, formally known as the EU Regulation on the establishment of a framework to facilitate sustainable investment, is European legislation aimed at providing a common classification system for determining which economic activities can be considered environmentally sustainable or “green.” The EU Taxonomy was developed as part of the European Green Deal initiative and aims to assist investors and businesses in identifying sustainable and environmentally friendly activities, particularly in the context of climate change and environmental protection.

Some key aspects of the EU Taxonomy include:

  1. Classification of Activities: The EU Taxonomy categorizes economic activities based on their contribution to 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, and protection and restoration of biodiversity and ecosystems.

  2. Transparency and Reporting: Companies falling under the EU Taxonomy are encouraged to transparently report on how their activities contribute to the specified environmental objectives. This helps investors and stakeholders make decisions based on sustainability information.

  3. Green Bonds and Financing: The EU Taxonomy can serve as a reference framework for green bonds and other sustainable financing instruments, enabling investors to identify which projects and activities qualify as green.

  4. Harmonization Across the EU: The Taxonomy is intended to provide a common standard within the EU, ensuring that businesses and investors do not face different definitions and classifications of sustainability in different member states.

  5. Additional Legislation: The EU Taxonomy Regulation is gradually expanded and supplemented with detailed technical criteria and sector-specific legislation to facilitate its application.

The purpose of the EU Taxonomy is to prevent greenwashing and ensure that sustainability claims and labels are reliable and comparable. It helps investors and businesses identify sustainable investments and activities and promotes a more transparent and sustainable financial sector within the EU.

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