Greenstone’s team of sustainability experts can help you to interpret the EU Taxonomy regulation to determine whether or not you need to report, and then formulate a plan for how to comply.
What is The EU Taxonomy?
The EU Taxonomy is a classification method intended for investors, firms and issuers. The legislation, which entered into force on 12 July 2020, sets higher standards for businesses to disclose economic practices that have been accepted as or can classify as sustainable. The EU Taxonomy is a regulatory classification system that helps investors and companies define which economic activities are environmentally sustainable. The regulation also places a reporting obligation on several companies to disclose what proportion of their investments align with sustainable activities.
Who is affected by the EU Taxonomy?
Anyone can use the EU Taxonomy to classify their economic activities as sustainable. However, the new regulations will shape the flow of investments and the practice across a range of financial professions:
- The first group affected is financial market participants, and issuers offering financial products. These include pension funds, insurance providers, private equity funds, and corporate and investment banks.
- The second is large companies – with more than 500 employees – that fall under the scope of the European Union (EU) Non-Financial Reporting Directive (NFRD).
- Thirdly, Member States on the EU setting public measures, standards or labels for green financial products or green bonds.
How to comply with the EU Taxonomy
To comply with the EU Taxonomy and its performance thresholds, companies will need to start disclosing their ‘sustainable investment objectives’. This will include the percentage of sustainable economic activity in terms of turnover, capital expenditure (CapEx) and, if applicable, operating expenses (OpEx).
For financial market participants offering financial products, where the relevant financial products contribute to one of the six ‘environmental objectives’, the entity must disclose:
- Details of the environmental objective(s) to which the underlying investment contributes; and
- A description of the extent to which the underlying investments are in sustainable economic activities. This should specify the share of investments in sustainable economic activities as a percentage of all investments selected in the financial product.
How Greenstone can help with the EU Taxonomy
Greenstone’s team of sustainability experts can help you to interpret the EU Taxonomy regulation to determine whether or not you need to report, and then formulate a plan for how to comply. Through our sustainability reporting software and support services, we enable organisations to collect, manage and report environmental data accurately and efficiently and comply with multiple regulations and frameworks including TCFD, SASB, CDP, GRI and SFDR.
For more information on how Greenstone’s software can enable companies to meet multiple global sustainability reporting requirements, including the EU Taxonomy, contact us or sign up for a software demo.