Navigating the EU Taxonomy

Part 2 of the Green Deal

Author

Mark Brunjes
October 24, 2023

Welcome aboard your express journey through the EU Taxonomy, the European Union's groundbreaking framework that's reshaping the landscape of sustainable finance. Consider this article your travel itinerary, packed with must-see landmarks, facts, and a roadmap to understanding the EU's role in green investments.

Whether you're an eco-conscious investor or a newcomer to the world of finance, this guide is your passport to a greener future. So, fasten your seatbelts; we're about to take off!

What is the EU Taxonomy? Your Compass in the World of Sustainable Finance

Imagine setting off on a European expedition through the intricate maze of sustainable finance. You'd want a reliable compass, right? That's where the EU Taxonomy comes in. This classification system is your go-to guide, helping investors, corporations, and policymakers differentiate between genuinely sustainable activities and mere greenwashing.

Originating from the European Green Deal, the Taxonomy is more than just a "green" stamp. It's a set of stringent criteria that align with environmental goals, serving as the gold standard in the EU's sustainable finance package.

Here's where it gets interesting: The EU Taxonomy isn't just a theoretical guide; it's a financial powerhouse. The European Commission has set ambitious targets, aiming to channel a staggering €175-290 billion annually into sustainable projects. And with the Taxonomy Regulation in effect since July 2021, companies are now mandated to disclose their alignment with these green benchmarks. No more empty promises; it's time for actionable sustainability.

The calendar now reads June 2023, and the European Union has been far from idle. They've been actively mapping out new territories in green finance, adding fresh milestones to our journey. It's not just the same old landmarks; new ones have been added, focusing on non-climate objectives like water conservation and biodiversity protection. It's like discovering hidden gems and secret gardens that make our expedition even more fruitful! Check out how the EU is tracking compared to the rest of the world in terms of sustainable companies per region below; far from idle indeed.

The Cartographers of Finance: ESG Rating Providers

But wait, there's more! As we traverse this ever-changing terrain, we learn that the mapmakers of the financial world—ESG rating providers—now require a special "license" to ensure their maps are accurate. Think of it as a stamp of approval from the European Securities and Markets Authority (ESMA), ensuring we stay on course.

The Eco-Sages: Platform on Sustainable Finance

Guiding us through these new developments is the Platform on Sustainable Finance, a council of eco-sages fine-tuning our map. They're the ones making our journey easier, all in line with the grand European Green Deal, the master blueprint for a sustainable future. Their main deliverables are as follows:

  1. Giving advice on how easy it is to use the EU's guidelines for green investments.

  2. Offering recommendations on the specific rules used to decide what counts as a "green" investment according to the EU.

  3. Keeping an eye on how much money is being invested in eco-friendly projects.

The Digital Frontier: EU Taxonomy's Role in Accelerating Digital Solutions for Sustainability

As our eco-train speeds through the digital realm, we marvel at how technology is supercharging climate action. According to a report by DIGITALEUROPE, the EU Taxonomy is a game-changer with the potential to decarbonize European industries by promoting sustainable investments in digital solutions and circular economy business models.

The Plot Twist: The Missing Piece of the Puzzle is Gaining Attention

But wait, there's a little twist in our story. Imagine our EU Taxonomy map is like a puzzle, and we've just found out a piece is missing! That missing piece is what we call "enabling technologies," which are digital tools and solutions that help make things more sustainable. Right now, the official EU Taxonomy rules don't include these helpful digital tools.

Good news, though! This missing puzzle piece is starting to get some attention. Organizations like Orgalim and the European Parliament Intergroup are pushing for these enabling technologies to be included in the EU Taxonomy. Even the European Commission is planning to address this in their upcoming rules.

So, it looks like this missing piece might soon find its rightful place, helping us complete the puzzle for a more sustainable future!

The Final Station: A New Chapter in Sustainable Finance

As we pull into the last station of our EU Taxonomy journey, it's clear that this isn't just a set of guidelines—it's a roadmap for a sustainable future. From the intricacies of tech innovation to the criteria that fuel it, the EU Taxonomy is shaping the narrative of environmental responsibility. But like any good journey, this one doesn't end here. It's a call to action for businesses, policymakers, and individuals alike.

Your Next Adventure Awaits: A Call to Action for a Greener Future

So, what's your next stop on this sustainability journey? Whether you're an investor, a tech innovator, or simply a concerned citizen, it's time to delve deeper into the EU Taxonomy and discover how you can contribute to a greener future. The train is leaving the station, and trust us, you don't want to miss it.

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