EU Taxonomy – new standards of “Green Growth” until 2050

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In 2018, the European Commission set up the “Sustainable Growth Financing Action Plan”, whose objective is to regulate the “Green Deal” for the development of healthcare and a socially oriented economy in the EU countries. In 2020, the EU Taxonomy regulations were adopted, in order to promote environmentally sustainable economic activities. These regulations are intended to direct capital flows to the development of environmentally sustainable economic activities, meaning – investments in the “Green Economy”. The Green Deal has gone into effect in 2022.

Read below how our partners and experts at Celsia.io explain: what is the EU taxonomy

What is EU Taxonomy – Criteria and Objectives

Within the framework of the EU Taxonomy, the European Commission determines which economic activities will meet the given standards of ecology and social economy in the future. Therefore, the ‘Sustainable Growth Financing Action Plan’ sets out the technical requirements for EU member states, on which the national legal frameworks that meet the requirements of the EU Taxonomy will be implemented. The criteria used to determine the provisions of the EU Taxonomy are four-fold:

1. The economic activity of the subjects is aimed at achieving at least one of the 6 goals of the EU Taxonomy: 
   1. Climate protection (from negative changes)
   2. Adaptation to inevitable climate changes
   3. Rational use of water resources
   4. Transformation of the linear economy into a closed economy cycle (this is the so-called circular economy)
   5. Protection from environmental pollution 
   6. Restoration of endangered species of animals and ecosystems
2. Economic activity performs a social function, providing participants in the process with at least minimum social security standards.
3. The activities are in line with the principles of the United Nations Organization for Business and Human Rights, as outlined in the Universal Declaration of Human Rights.
4. The activity meets the established criteria for technical evaluation as to whether the economic operator is investing in the tools and means necessary to achieve the environmental goals set by the EU Taxonomy.

What is the scope of EU competence Taxonomy?

The EU Taxonomy covers all areas of human activity. The criteria and goals of economic activity set out in the EU Taxonomy direct the activities of banks on the one hand, and on the other hand, these clients who need financing towards the development of sustainable financial products. This affects education, financial markets, and the IT industry. The following criteria and goals also encourage, through financial and image incentives, eco-development in sectors such as construction, operation, and restoration of buildings, the automotive industry in favor of the use of renewable energy sources and recycled materials, as well as in the installation, maintenance, and repair of energy-efficient equipment for light and heavy industry.

A key component of the EU Taxonomy is the preparation of participants in the process for climate change – this is a criterion for adapting to changes in the ecosystem we are used to. For example, considering the criteria applied to the construction of new buildings, the latter should be built considering future climate risks, both natural (temperature increase, floods) and man-made (pollution of the environment by human waste) nature. Furthermore, the EU Taxonomy criterion also evaluates these negative contributions, which can lead to a significant deterioration in environmental objectives.

Your current tasks of the subjects of the EU Taxonomy:

• Evaluate whether and how it can be done to introduce eco-technologies into the current means of production and operation.
• Consider the time and finances required for the introduction of eco-technology.
• Training personnel and introducing new subjects into educational institutions to bring about a new culture of production, operation, and disposal in all spheres of human activity.

EU Taxonomy Priorities

Both the criteria and objectives of the EU Taxonomy, as well as the classification of economic entities, primarily set standards for large investment funds and banks, as well as for industry companies that are engaged in urban development and energy generation. These standards prioritize the activities of entities according to the criteria of transparency, investment in renewable energy sources, and environmental protection.

The other regulatory and supervisory requirements that are still in preparation also suggest that classification in terms of taxonomy will also have an impact on capital adequacy or risk assessment in financing.

A look into the future through the prism of the EU Taxonomy

During 2023, additional criteria for assessing economic operators within the framework of the EU Taxonomy will be adopted at the level of the European Commission and national parameters. These criteria should strengthen the toolkit for achieving high environmental goals. The goal by 2050 is that the means of production and operation, as well as energy production and energy generation, should reach zero harmful carbon dioxide emissions into the atmosphere.

According to our friends at Celsia.io, the activities of subjects of health care and social economy will be reflected in the financial statements, as it applies to all entities whose activities fall within the competence of the EU Taxonomy. Based on the evaluation of these reports, the authors of the best environmental indicators will be offered more favorable financing terms and image advertising.