02 Dec EU TAXONOMY – THE ENVIRONMENTALLY SUSTAINABLE ACTIVITIES CLASSIFICATION SYSTEM
TARGETING INVESTMENTS TOWARDS ENVIRONMENTALLY SUSTAINABLE ACTIVITIES THROUGH EU TAXONOMY
The European Union (EU), in the framework of the European Green Deal, signed in 2020, seeks to guide investments towards activities that contribute to the environmental goals set to create more resilient and sustainable systems. Accordingly, the EU has promoted the creation of the EU Taxonomy, a system to transparently identify activities that contribute to one or more environmental objectives without harming any others in order to direct investments towards these types of activities.
“New EU taxonomy criteria will define activities that best contribute to fighting climate change and to guiding the massive investments needed. Other measures will ensure companies provide reliable information on sustainability. The EU leads the way on sustainable finance.”.Ursula von der Leyen
The EU Taxonomy is a science-based transparency tool for companies and investors. It thus facilitates communication and increases the credibility of claims of environmentally sustainable activities. The basis was established in summer 2020 and is divided into 4 general conditions:
- Substantial contribution to one of the 6 environmental objectives:
- Climate change mitigation
- Adaptation to climate change
- Sustainable use and protection of aquatic and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
- Economic activity causes no significant harm to any of the other environmental objectives
- Ensuring minimum social safeguards
- Compliance with the technical criteria established for the activity under study.
Alignment with the EU Taxonomy will be communicated in financial terms: CAPEX, OPEX and turnover.
WHEN DOES IT COME INTO FORCE AND WHAT ARE THE NEXT STEPS?
By now, technical criteria have been published to check those eligible activities (you can check if an activity is eligible using the EU Taxonomy Compass) contribute significantly to the objectives of 1) climate change mitigation and 2) climate change adaptation. For objective number 1), many of the eligible activities require a verified Life Cycle Assessment (LCA) to be attached. Contactica is a specialist in the execution of such analyses, which can be used for many additional purposes.
The EU Taxonomy will come into force on 1 January 2022. EU plans include that companies will be mandatory to communicate 1) which activities are eligible under the EU Taxonomy and 2) which activities are aligned with the EU Taxonomy criteria for objectives 1 and 2.
In 2022, large financial and non-financial organisations under the NFRD will be required to communicate whether or not their activities are eligible under the current EU Taxonomy criteria. In 2023, large non-financial companies will have to communicate the alignment of their eligible activities with the EU Taxonomy, while financial companies (listed companies, banks and insurers) will be obliged to communicate the alignment of their eligible activities with the EU Taxonomy criteria in 2024. SMEs will be able to communicate the eligibility and alignment of their activities on a voluntary basis, with a view to having to do so on a mandatory basis by 2026.
The technical criteria for objectives 3-6 have been published in a draft that is currently under consideration and revision and will be finally adopted in December 2021, with a view to being implemented in January 2023.
HOW IS EU TAXONOMY APPLIED?
If your organisation is among those obliged to report which activities are eligible or you want to voluntarily report what percentage of your activities are aligned with the EU Taxonomy criteria, you can use Contactica to carry out the process in the following steps:
- Analysis of eligible and ineligible activities
- Analysis of the contribution of eligible activities to environmental objectives (currently 1 and 2, from December, 3-6 also).
- Verification that no substantial damage is caused to the other objectives.
- Verification that the minimum social safeguards are respected.
If you are interested in applying the EU Taxonomy, please do not hesitate to contact us by email at firstname.lastname@example.org or by calling (+34) 660 855 535.