The European Commission announced the publication of a new set of frequently asked questions (FAQs), aimed at helping support investors in the implementation of the EU Taxonomy, its classification system for defining sustainable economic activities.

According to the Commission, the publication is aimed at making the Taxonomy easier to use, and forms part of its efforts to reduce the administrative burden on companies applying the EU sustainable finance framework.

The EU Taxonomy is part of the EU Action Plan on Sustainable Finance, establishing a classification system enabling the categorization of economic activities that play key roles in contributing to at least one of six defined environmental objectives, and that Do No Significant Harm (DNSH) to the other objectives. The six objectives include climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.

The Taxonomy entered into effect in 2022 with disclosure requirements on the first two objectives, climate change mitigation and adaptation, based on the EU Taxonomy Climate Delegated Act, and with the other four objectives applying as of the beginning of 2024, based on the Environmental Delegated Act.

Key topics covered by the FAQ include general Taxonomy requirements, interoperability of the Taxonomy with the CSRD’s European Standards for Sustainability Reporting (ESRS), verification and assurance requirements, technical screening criteria for specific activities for each of the six environmental objectives, and clarifications for reporting obligations under the Climate and Environmental Delegated Acts. The FAQ also includes a dedicated section covering questions related to DNSH criteria.

Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, said:

“The EU Taxonomy provides investors with a common understanding of the environmental impacts of their investments while guiding companies’ sustainable transition efforts. Our focus now is to improve the usability of the framework and these FAQs will help companies as they apply the Taxonomy.”

Click here to access the European Commission’s EU Taxonomy FAQs.