The Technical Expert Group (TEG) on Sustainable Finance published a Taxonomy, which sets out screening criteria for economic activities that can contribute substantially to climate mitigation and adaptation. The taxonomy is a tool to support private investments towards meeting GHG emission reductions in line with the Paris Agreement.
The EU Taxonomy is a tool to help investors, companies, issuers and project promoters navigate the transition to a low-carbon, resilient and resource-efficient economy. The Taxonomy sets performance thresholds (referred to as ‘technical screening criteria’) for economic activities which:
- make a substantive contribution to one of six environmental objectives;
- do no significant harm (DNSH) to the other five, where relevant;
- meet minimum safeguards (e.g., OECD Guidelines on Multinational Enterprises and the UN Guiding Principles on Business and Human Rights).
The performance thresholds will help companies, project promoters and issuers access green financing to improve their environmental performance, as well as helping to identify which activities are already environmentally friendly. In doing so, it will help to grow low-carbon sectors and decarbonise high-carbon ones. The EU Taxonomy is one of the most significant developments in sustainable finance and will have wide ranging implications for investors and issuers working in the EU, and beyond.
The European Commission established a Technical Expert Group on Sustainable Finance, which was tasked with developing recommendations on a range of topics, including what the Taxonomy technical screening criteria should be for the objectives of climate change mitigation and adaptation. This report sets out the TEG’s final recommendations to the European Commission. This report contains recommendations relating to the overarching design of the Taxonomy, as well as guidance on how users of the Taxonomy can develop Taxonomy disclosures. It contains a summary of the economic activities covered by the technical screening criteria.
These recommendations have been developed over 20 months and with substantial consultation and scientific and technical input. The TEG has received input from all parts of the investment chain, industry sector representatives, academia, environmental experts, civil society and public bodies. Combined, these reports contain detailed explanation of the rationale and methodologies behind the TEG’s conclusions. These reports supersede the two previous reports from the TEG (early feedback report – Dec 2018, technical report – June 2019).