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- Simplified Guidance for Investors: The FAQ provides clarity on implementing the EU Taxonomy, easing its application for both public and private entities.
- Expanded Objectives Covered: It addresses all six environmental objectives, with new criteria effective from 2024 for non-climate objectives.
- Alignment with CSRD: The document details the interplay between the EU Taxonomy and the European Sustainability Reporting Standards (ESRS).
EU Taxonomy FAQ: A Step Towards Usability
The European Commission released a comprehensive FAQ document to aid in implementing the EU Taxonomy, its sustainability classification system. Aimed at reducing administrative burdens, the FAQs provide insights into regulatory requirements and technical criteria for environmental reporting.
Mairead McGuinness, Commissioner for Financial Services, highlighted the significance of the Taxonomy:
“The EU Taxonomy provides investors with a common understanding of the environmental impacts of their investments while guiding companies’ sustainable transition efforts. Our focus now is to improve the usability of the framework and these FAQs will help companies as they apply the Taxonomy.”
A Comprehensive Framework
The EU Taxonomy, part of the EU Action Plan on Sustainable Finance, establishes criteria for identifying sustainable economic activities. It focuses on six environmental objectives:
- Climate Change Mitigation
- Climate Change Adaptation
- Sustainable Use of Water Resources
- Circular Economy Transition
- Pollution Prevention and Control
- Biodiversity Protection
Effective from 2024, the Taxonomy expands its focus to include non-climate objectives under the Environmental Delegated Act.
Key Topics in the FAQ
The FAQ provides guidance on:
- General Requirements: Explanation of core concepts like “Do No Significant Harm” (DNSH).
- Interoperability: Aligning Taxonomy criteria with the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS).
- Technical Screening Criteria: Specific guidance for each environmental objective and sectoral reporting.
- DNSH Clarifications: Dedicated sections for each objective, offering clarity on compliance.
The document also underscores the importance of transparent reporting and regular third-party verification for compliance.
RELATED ARTICLE: EU Commission Publishes FAQ on Implementing New Corporate Sustainability Reporting Rules
Supporting Sustainable Investments
The European Commission aims to scale up sustainable investments with this initiative. The FAQs address common challenges faced by companies and financial institutions, ensuring that sustainability reporting is both cost-effective and impactful.
This document marks a significant step toward integrating environmental, social, and governance (ESG) principles into mainstream financial systems, paving the way for a sustainable future.
Click here to access the European Commission’s EU Taxonomy FAQs.