Governance & Policy
EU Taxonomy
Definition
The EU Taxonomy Regulation, Regulation (EU) 2020/852, establishes a framework that classifies economic activities as environmentally sustainable when they substantially contribute to one of six environmental objectives, do no significant harm to the others, and meet minimum social safeguards. It underpins disclosure duties for companies and financial market participants.
References
Legal text and environmental objectives
Objectives and delegated acts overview
Overview
What it means
It gives "sustainable" a legal, technical meaning in the EU: an activity must pass detailed screening criteria, not just a narrative test.
How it is used
Companies report taxonomy-aligned turnover, capital and operating expenditure; investors use alignment percentages in product disclosures and portfolio construction.
Why it matters
It is the reference classification feeding SFDR, CSRD, the EU green bond standard and many national rules, shaping where capital is counted as green.
Review questions
What framework or method is being used? What evidence supports the term? What would a reader reasonably assume if the boundary is not stated?