Taxonomy will allow investors to focus their investments on more sustainable technologies and businesses. It will be essential for the EU to become climate neutral by 2050 and achieve the 2030 Paris Agreement targets. These include a 40% reduction in greenhouse gas emissions, for which the Commission estimates that the EU needs to fill an investment gap of around EUR 180 billion per year. Taxonomy is a classification tool that lists economic activities and performance criteria that are in line with Europe`s commitment to achieve net zero carbon emissions by 2050 and to build resilience to climate change. The taxonomy of combating climate change and adapting to climate change should be defined by the end of 2020 to ensure full implementation by the end of 2021. For the other four targets, taxonomy should be defined by the end of 2021 for implementation by the end of 2022. Taxonomy includes two subcategory of “allowing” and “transition” activities. For each financial product, the share of activities invested in the master`s and transition activities is made public. On this basis, the EC is responsible for defining effective classification by defining technical screening criteria in the form of delegated acts for each relevant environmental objective or sector. The EC is assisted by a group of technical experts, the `sustainable funding platform`, which provides advice on the development and revision of technical screening criteria, as well as on verifying their usefulness. In addition, the EC will be consulted by a group of experts made up of experts from Member States on the adequacy of technical screening criteria and the EC`s approach to these criteria. The new rules will be formally adopted by the Council and Parliament after a legal and linguistic revision of the text, in accordance with the “early second reading” procedure.
Nuclear energy and natural gas have not been explicitly excluded or included in the list of environmentally eligible economic activities. The taxonomy regulation leaves it to delegated acts – based on stakeholder input, which includes the sustainable financing platform – to determine the role of nuclear energy and/or, where appropriate, natural gas in taxonomy. As noted below, the taxonomy regulation contains a revision clause that allows the Commission to extend the regulation to other activities that seriously harm environmental objectives. On 18 December 2019, the Council and the European Parliament reached a political agreement on the taxonomy regulation. On 15 April 2020, the Council adopted its position at first reading on the taxonomy regulation in writing. The European Parliament approved the text on 18 June 2020, in accordance with the “second reading” procedure at the beginning of the procedure. The regulation recognises six types of economic activities that are considered to be taxonomy-friendly activities: in December 2019, the European Council and the European Parliament reached a political agreement on the text of a proposed regulation to create a framework to facilitate sustainable investment, the `taxonomy regulation`. The taxonomy regulation establishes an EU-wide taxonomy system, which aims to provide businesses and investors with a common framework for determining the extent to which economic activities can be considered “ecologically sustainable”. At the same time as the Advertising Regulation1, the taxonomy regulation will require companies to disclose the degree of ecological sustainability of traditional funds and pension products that are promoted as environmentally friendly, or to include disclaimers if they do not, and will require companies subject to the Non-Financial Reporting Directive2 to provide certain information regarding the taxonomy regulation in their corresponding notifications.