EU Taxonomy: Scaling up sustainable investments in the EU

12 October 2021, Category: All insights, News, Tags:

E Co. has been involved in work related to understanding and implementing EU taxonomy into practice. The EU Taxonomy is a new, overarching, and robust platform to steer the EU market into the substantially sustainable direction.

What is the EU Taxonomy?

In order to meet the EU’s climate and energy targets for 2030 and reach the objectives of the European green deal, it is vital to direct investments towards sustainable projects and activities. The current COVID-19 pandemic has reinforced the need to redirect money towards sustainable projects in order to make our economies, businesses and societies – in particular health systems –more resilient against climate and environmental shocks.

The EU Taxonomy offers a classification system that will serve as an ultimate safeguarding mechanism. Built with common language and very ambitious standardisation system, the EU taxonomy is a classification system that establishes a list of environmentally sustainable economic activities. It has the potential to play an important role helping the EU scale up sustainable investment and implement the European green deal. The EU taxonomy would provide companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable.

Six environmental objectives covered by the EU Taxonomy

The EU Taxonomy has been adopted by the European Commission in summer of 2021. It consists of an integrated controlling mechanism constituted of six environmental objectives:

  1. Climate change mitigation
  2. Climate change adaptation
  3. The sustainable use and protection of water and marine resources
  4. The transition to a circular economy
  5. Pollution prevention and control
  6. The protection and restoration of biodiversity and ecosystems

Implementation – Do No Significant Harm, The Recovery and Resilience Facility

The Taxonomy requires that a variety of key stakeholders complies to certain criteria and standards. There are two main approaches related to its implementation. Firstly, investments ought to comply with at least one significantly contributing criteria to at least one of six environmental objectives. On the other hand, it has to comply with minimum standards five other environmental objectives. Criteria are defined by so called “regulations acts” and thus offer common understanding at the EU market level. The compliance with the minimum criteria is called “Do No Significant Harm” principle or simply DNSH.

One of the first practical utilisations of the Taxonomy was through The Recovery and Resilience Facility. The Recovery and Resilience Facility (RRF) is at the heart of NextGenerationEU which will provide €800 billion (in current prices) to support investments and reforms across the EU.

E Co’s green recovery work with the European Commission

E Co’s experts were recently part of an engagement by the European Commission to work on moving Croatia towards a green recovery path. Our role involves addressing climate change in Croatia’s recovery and resilience plan and ensuring that none of the investments will have a significant negative harm on the environment. Our experts ensured that plan with the budget of 6 billion EUR gets approved and that it passes the rigorous EU Taxonomy evaluation criteria.

The critical role and value added in understanding the needs of the Taxonomy was recognised. As a result, E Co. has now been engaged in providing support to various Croatian national institutions to understand and implement the EU Taxonomy into their processes. We look forward to working with the latest projects developing in this space.

Read about how we’re working with AECOM on an EBRD framework to help cities secure green financing

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