What is the EU Taxonomy?

The EU Taxonomy is a categorisation system developed by the European Union to define which economic activities can be considered "environmentally sustainable". The main objective is to provide a unified, science-based framework to guide private and public investment towards activities that make a real contribution to the green transition.

The legal basis is Regulation (EU) 2020/852 establishing a framework to facilitate sustainable investment, known simply as Taxonomy Regulation. It is part of the EU Sustainable Finance Action Plan legislative package.

Under the regulation, an economic activity is considered sustainable if:

1. It contributes substantially to at least one of the six EU environmental objectives;
2. No significant harm (DNSH principle - Do No Significant Harm) to any other objective;
3. It respects minimum social guarantees;
4. It shall comply with the technical criteria laid down by delegated acts.

What are the six environmental objectives?

1. Climate change mitigation
2. Adapting to climate change
3. Sustainable use and protection of aquatic and marine resources
4. Transition to a circular economy
5. Pollution prevention and control
6. Protect and restore biodiversity and ecosystems.

Adopted in April 2025, Omnibus I introduces important changes such as:

-reduced scope: the EU Taxonomy reporting obligations will only apply to companies with more than 1,000 employees and annual revenues of more than €450 million

-introduction of a materiality threshold of 10%: Companies can consider activities that represent less than 10% of turnover, CapEx or OpEx as non-core and decide not to report them

-postponement of reporting deadlines: for "wave 2" companies and listed SMEs ("wave 3"), the reporting obligations under the CSRD and the EU Taxonomy have been postponed by two years, until 2028 and 2029 respectively.

Omnibus II proposes to simplify the technical criteria (to make them clearer and easier to apply) and to introduce the option of voluntary reporting, including partial alignment with the Taxonomy, if not all criteria are met.

Why is it important for businesses?

For companies, the EU Taxonomy is much more than a theoretical initiative. It is influential:

-access to finance: compliant companies can get green finance more easily

-ESG reporting: for large and listed companies, CSRD reporting (EU Directive 2022/2464) includes requirements on taxonomy alignment: what percentage of turnover, capital expenditure (CapEx) and operating expenditure (OpEx) is associated with sustainable activities

-reputation and compliance: taxonomy alignment is an indicator of transparency.

Practical example

A concrete example of application of the EU Taxonomy is the financing of an offshore wind farm by the French bank Natixis. Under a case study published by the United Nations Environment Programme Finance Initiative (UNEP FI), Natixis assessed the project's alignment with the EU Taxonomy criteria for offshore wind power generation. The analysis included verification of the substantial contribution to climate change mitigation, compliance with the principle of no significant harm (DNSH) and compliance with minimum social safeguards. The study concluded that the project is aligned with the EU Taxonomy, demonstrating its practical applicability in assessing sustainable investments.