EU Taxonomy Regulation extended across economy

Posted on April 15, 2022 by Editor

In case you missed it, the EU Taxonomy is undergoing an important transformation. Our usual caveat is important here: ‘taxonomy’ in this context does not refer to an XBRL taxonomy providing the tags needed for digital reporting, but to a classification system for the extent to which economic activities can be considered environmentally sustainable and to contribute to environmental objectives. The EU Taxonomy forms an important part of Europe’s sustainability reporting framework, providing a way for investors to judge the greenness of their investments.

The European Commission’s Platform on Sustainable Finance has published a new report recommending a major expansion of the EU Taxonomy, adding categories for activities with significantly harmful impact and those with intermediate performance. In other words, it adds red and amber categories as well as the existing green, and – with a discussion of how to approach intrinsically low-environmental-impact activities – potentially covers all economic activities.

“An extended environmental Taxonomy is intended to increase transparency across the entire economy,” says the report. “This transparency will help companies and other economic actors tell their own transition stories whilst robustly ensuring that clarity is brought to bear on what really makes a substantial contribution, what makes a lesser but important contribution, and what is actually causing the problem, where urgent action is needed.”

Read more here.

Also on the subject of the EU Taxonomy, a recent article the Harvard Law School Forum on Corporate Governance provides a useful overview – and visual diagrams! – of how it fits within the wider European context. Read it here.

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