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EU Council adopts sustainable finance taxonomy

The Council of the EU (“the Council“) has adopted a regulation setting out an EU-wide classification system which will enable businesses and investors to identify economic activities which are considered environmentally sustainable.

This classification system, or “taxonomy”, will enable investors to refocus their investments on more sustainable technologies and businesses. The Council has said that this will be key to enabling the EU to become climate neutral by 2050 and achieve the Paris agreement’s 2030 targets, which include a 40% cut in greenhouse gas emissions.

The future framework will be based on six EU environmental objectives

  • climate change mitigation;
  • climate change adaptation;
  • sustainable use and protection of water and marine resources;
  • transition to a circular economy;
  • pollution prevention and control;
  • protection and restoration of biodiversity and ecosystems

The Council has said the taxonomy for climate change mitigation and climate change adaptation should be established by the end of 2020, for application by the end of 2021. The taxonomy for the other four objective should be established by the end of 2021 for application by the end of 2022. The Regulation now needs to be adopted by the European Parliament and can then be published in the Official Journal.

Amelia Green