EU Taxonomy alignment
What are the Green Projects?
According to the EU Report on Green Bonds, Green Projects” are those projects aligned with the requirements set forth by the EU Taxonomy, this meaning that they should:
- Substantially contribute to one or more of the 6 EU Taxonomy’s objectives:
- Climate Change Mitigation.
- Climate Change Adaption.
- Sustainable Use and Protection of Water and Marine Resources.
- Transition to Circular Economy.
- Pollution Prevention and Control.
- Protection and Restoration of Biodiversity and Ecosystems (for example, through a positive balance of the Valuation of the Natural Capital).
- Do not significantly harm any of the other objectives (DNSH).
- Comply with minimum safeguards (as the OECD Guidelines on Multinational Enterprises and the UN Guiding Principles on Business and Human Rights).
- Comply with the Technical Screening Criteria (TSC).
Which types of economic activity has the EU Taxonomy created?
According to the EU, the Taxonomy is to effectively create, from now on, 3 thresholds for economic activities able to be financed within the EU and to be considered as sustainable financing:
- Substantial contribution to the environment (green).
- Significant harm (brown, or perhaps red).
- An intermediate category, of neither substantial contribution nor significant harm.
In line with the above, there should be disclosed which investments are aligned with the EU taxonomy, and if in case not being feasible to demonstrate that all the activity of a company or of a financial institution is aligned, it shall be determined:
- % of SALES generated from those activities aligned with the EU Taxonomy.
- % of EBITDA generated from those activities aligned with the EU Taxonomy.
- % of CAPEX invested in those activities aligned with the EU Taxonomy.
Any activity is able to verify its taxonomy alignment; nowadays, according to its regulation, the Taxonomy is focused on the following groups:
- Financial market participants offering financial products in the EU, including pension funds providers.
- Large companies who are already required to provide a non-financial information under the Non-Financial Reporting Directive; including the listed companies.
- The EU and Member States, when setting public measures, standards or labels for green financial products or green (corporate) bonds.
To complete the first set of disclosures about the Taxonomy, covering activities that substantially contribute to climate change mitigation and/or adaptation:
- Financial market participants, before December 31st, 2021.
- Companies through 2022.
To complete an expanded set of disclosures and protection of ecosystems covering activities that substantially contribute to all six environmental objectives, including water, circular economy, pollution prevention and control and ecosystem protection
- Financial market participants and companies, by the end of 2022.