EU’s green taxonomy

Only 10 years remain to achieve the UN’s Sustainable Development Goals. The World Economic Forum has declared that ‘serious climate action’ is needed in order to avoid a dangerous level of global warming by limiting the planet’s average temperature to no more than 2°C higher than pre-industrial levels (in accordance with the Paris Agreement). It asked participants at its Davos 2020 summit to commit to net-zero carbon emissions by 2050. The European Union (EU) alone must invest an additional €175bn–€290bn (US$190bn–US$315bn) annually to meet its climate and emissions targets. Is the EU equipped to meet these objectives, especially in light of recent weather events?

Investing in environmentally sustainable activities is a key part of the solution. Despite this, there is currently no single, agreed way to identify such investments. Different governments and institutions use different identification criteria; this can lead to confusion, reduced confidence, higher costs and conflicting results. A reliable, consistent approach is needed. Enter the EU’s ‘unified classification system for sustainable activities’. Better known as the EU Taxonomy, it forms part of the European Commission’s (EC) 2018 Action Plan on Financing Sustainable Growth.

Common language

The Taxonomy provides a common language for identifying ‘environmentally sustainable’ economic activities and selling corresponding products. It can help increase access to financing, improve transparency and reduce opportunities for ‘greenwashing’ (providing misinformation about environmental performance). It is designed to meet current and future climate goals.