Taxonomy? EU Taxonomy for Sustainable Activities
- EcoVision
- 4 days ago
- 2 min read
In ESG and sustainability, taxonomies refer to classification systems that define what counts as environmentally sustainable, socially responsible, or well‑governed economic activities.
In simple terms:
A taxonomy is a rulebook that tells investors which activities are truly “green” or “sustainable.”
These taxonomies help:
prevent greenwashing
guide investors toward credible ESG investments
create a common language for sustainability across markets
support policy and regulatory alignment
Examples of well‑known ESG taxonomies:
EU Taxonomy for Sustainable Activities – one of the most detailed global standards
China’s Green Bond Endorsed Project Catalogue
ASEAN Taxonomy for Sustainable Finance (version 4, 6-November-2025)
UK Green Taxonomy (in development)
Taxonomies typically classify activities such as:
renewable energy
energy efficiency
clean transportation
circular economy
social impact projects
They also include criteria for:
Do No Significant Harm (DNSH)
minimum safeguarding standards
emissions thresholds
In summary:
ESG taxonomies help investors and regulators determine what is genuinely sustainable so that capital flows to activities that support climate and social goals.
Look into more details: What Is the EU Taxonomy?
The EU Taxonomy is a classification system created by the European Union that defines which economic activities can be considered environmentally sustainable.
It is one of the world’s most advanced and influential sustainability frameworks.
Its purpose is to:
guide investors toward genuinely green activities
prevent greenwashing
support EU climate targets (net‑zero by 2050)
increase transparency in sustainable finance
The Six Environmental Objectives
An activity is considered sustainable if it contributes substantially to at least one of these:
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
Three Core Requirements
For an activity to qualify under the EU Taxonomy, it must:
Contribute substantially to one environmental objective.
Do No Significant Harm (DNSH) to any of the other five objectives.
Comply with Minimum Safeguards
(human rights, labour standards, OECD guidelines).
This ensures an activity is not “green” in one part while harming another.
What Activities Are Included?
The taxonomy covers around 100+ economic sectors, including:
Renewable energy
Electric vehicles & charging infrastructure
Energy efficiency in buildings
Manufacturing of green technologies
Water treatment
Circular economy practices
Sustainable agriculture & forestry
It also sets technical screening criteria—precise thresholds and metrics.
Example: To qualify, a power plant must emit less than 100g CO₂/kWh.
Why It Matters for Companies and Investors
Companies must report:
what percentage of their turnover, CapEx, and OpEx is “taxonomy‑aligned.”Investors use the taxonomy to assess:
green portfolios
sustainable bonds
compliance with EU regulations (e.g., SFDR, CSRD)
This makes the taxonomy a backbone of European sustainable finance.
Controversies and Challenges
The EU Taxonomy has sparked debate, especially over:
Inclusion of nuclear and natural gas as “transitional” activities
Complexity of reporting
Burden on small companies
Constantly evolving technical criteria
Despite criticisms, it remains the most rigorous green finance framework globally.
Why It’s Important Globally
The EU Taxonomy is influencing:
ASEAN Taxonomy
UK Green Taxonomy
China–EU Common Ground Taxonomy
Financial institutions and investors worldwide
It sets a global benchmark for defining what is truly sustainable.
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