EU Taxonomy
The EU Taxonomy is the European Union's classification system for environmentally sustainable economic activities. An activity qualifies when it substantially contributes to at least one specified environmental objective, does no significant harm to the others, meets minimum safeguards, and complies with applicable technical screening criteria.
In simple terms
The Taxonomy Regulation establishes six environmental objectives and a common framework, while delegated acts specify screening criteria and disclosure details. Taxonomy eligibility means an activity is described in the criteria; Taxonomy alignment means it also satisfies the substantive contribution, do-no-significant-harm, minimum-safeguards, and technical requirements. The system classifies activities rather than declaring an entire company sustainable. Reporting can include measures such as aligned turnover, capital expenditure, or operating expenditure, depending on the entity and current rules. Criteria and disclosure requirements can change, so dated legal text matters.
Why it matters
Within sustainable finance, a shared classification can improve comparability, support investment decisions, and reduce greenwashing from broad environmental claims that use inconsistent definitions. It also influences corporate and financial-market disclosures. However, a percentage requires context: eligibility is not alignment, one aligned activity does not describe every impact, and legal applicability depends on current delegated acts and reporting rules.
Example
For example, a manufacturer first identifies whether an activity is covered by the Taxonomy. It then tests the current substantial-contribution criteria, do-no-significant-harm conditions, and minimum safeguards before calculating the relevant aligned financial measure. It does not label the whole company green merely because one project qualifies.
How it differs
Sustainable finance
Sustainable finance is a broad field of financial decision-making. The EU Taxonomy is a specific EU legal classification system used to identify environmentally sustainable economic activities under defined criteria.
References
Current status
- As of
- Issuer
- European Union
- Jurisdiction
- European Union
- Instrument or version
- Regulation (EU) 2020/852 and applicable delegated acts, including Delegated Regulation (EU) 2026/73
- Status
- Regulation (EU) 2020/852 is in force, with operative requirements and criteria specified through delegated acts as amended.
Applicability: Classification and disclosure depend on the activity, environmental objective, current technical screening criteria, minimum safeguards, reporting entity, and applicable reporting period.