Green but not (yet) heard

Recent green finance development – EU taxonomy


The danger of ‘greenwashing’ non-sustainable assets led the EU to publish their taxonomy to protect the integrity of the green loan market. We breakdown the EU taxonomy briefly to demystify the recent development.

EU Taxonomy final report was published on 9 March 2020 to provide standards and measurable criteria to determine ‘green’ and is supplemented by a technical annex including and updated methodology and technical screening criteria. This establishes a framework to facilitate the transition to sustainable investment and provides a classification system to determine which economic activities are low carbon, resilient and resource efficient.

The EU’s Technical Expert Group (“TEG”) have set performance thresholds for economic activities which:

  • make a substantive contribution to one of the six environmental objectives listed below;
  • do no significant harm to the other objectives; and
  • meet all minimum safeguards (i.e. UNGP and OECD Guidelines).

The methodology for determining the first two objectives is fully set out in the taxonomy and the methodology for the remaining four objectives is expected by the end of 2021.

The methodology for determining the first two objectives is fully set out in the taxonomy and the methodology for the remaining four objectives is expected by the end of 2021.

The EU taxonomy includes six environmental objectives:

Better outcomes

1. Climate change mitigation

clean energy wind turbines

2. Climate change adaption

clouds pollution rain

3. Sustainable protection of water and marine resources

circular economy

4. Transition to a circular economy

sun field environment

5. Pollution prevention and control

pollution iceberg

6. Protection and restoration of biodiversity and ecosystems

It is worth noting that TEG has confirmed that although their priorities have not been sidelined by Covid-19, there is presently an investment deficit of €180bn per annum needed to align with the Paris Agreement goals (which is being addressed). The taxonomy applies to EU member states, large companies and financial market participants and the UK government has committed to matching or exceeding the EU standards post-Brexit.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions


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