The EU taxonomy is used to help investors and companies identify sustainable investments and to promote sustainable economic activity. The taxonomy forms the backbone to support the EU's sustainable finance initiatives. For example the EU's Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD).
The EU taxonomy is a classification system developed by the European Union to help identify which economic activities can be considered environmentally sustainable. The purpose of the EU taxonomy is to create a common language and understanding of what is meant by "sustainable" economic activity, which can be used to guide investments towards a more sustainable future.The EU taxonomy is based on six environmental objectives: 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. Under each objective, economic activities are classified as either contributing substantially to the objective, making a significant contribution, making a moderate contribution, or having no significant contribution or causing harm to the objective.
