Overview
The EU Taxonomy is a benchmark for what counts as environmentally sustainable. It creates a level playing field, letting stakeholders reliably assess the environmental performance of an organisation or asset.
It was established under Regulation (EU) 2020/852 and entered into force in July 2020, following the EU Sustainable Finance Action Plan of 2018.
The Taxonomy is the baseline framework that other EU regulations build on:
- CSRD (Corporate Sustainability Reporting Directive): which companies must report sustainability data, and what they must disclose.
- SFDR (Sustainable Finance Disclosure Regulation): how investment funds declare their sustainability credentials.
- EUGBS (EU Green Bond Standard): what a bond's use of proceeds must exhibit to carry the EuGB label.
The Taxonomy is also used as a reliable use-of-proceeds reference in the voluntary labelled instrument market, such as instruments aligned with the ICMA Green Bond Principles and LMA Green Loan Principles.
The six environmental objectives
Each plays its own role in the European Union's wider environmental goals.
| Objective | What it covers |
|---|---|
| Climate Change Mitigation | Reducing greenhouse gas emissions, including activities consistent with holding the global temperature rise below 1.5°C and a 2050 net-zero pathway. |
| Climate Change Adaptation | Reducing the adverse effects of current or future climate change. This may include flood defences, drought-resistant crops, climate-proofing infrastructure. |
| Sustainable Use & Protection of Water & Marine Resources | Protecting aquatic ecosystems, improving water quality, and ensuring clean wastewater management. |
| Transition to a Circular Economy | Reducing waste and increasing re-use and recycling, extending product lifespans, and limiting raw material use. |
| Pollution Prevention & Control | Eliminating or drastically reducing hazardous emissions into the air, water, or land. |
| Protection & Restoration of Biodiversity & Ecosystems | Protecting wildlife, halting deforestation, restoring degraded habitats, and supporting endangered flora and fauna. |
Eligibility vs. alignment
An activity is eligible if it appears in the Taxonomy and matches the description set out there. NACE activity codes are used to determine eligibility.
To be aligned, an asset must:
- Be eligible (see left).
- Meet the activity's Technical Screening Criteria, also known as Substantial Contribution Criteria, demonstrating a substantial contribution to one of the six objectives.
- Meet the Do No Significant Harm (DNSH) criteria, mapped to the other five objectives not assessed at screening level.
And the company behind it must:
- Comply with the Minimum Social Safeguards.
Is it relevant for me?
The regulation primarily captures three groups, turning sustainability from a marketing option into a measurable compliance metric.
- Financial market participants: asset managers, insurers, pension funds, and venture funds. If they market a product in the EU as "sustainable," they must disclose exactly what percentage of the underlying fund aligns with the Taxonomy, under SFDR.
- Large companies: any company required to publish sustainability reports under CSRD must calculate and disclose three key financial KPIs showing Taxonomy eligibility and alignment. Check whether reporting is required for you.
- Turnover: what share of revenue comes from green activities?
- CapEx: what share of investment is going toward building or scaling green assets?
- OpEx: what share of running costs maintains green activities?
- EU member states and the EU itself: public authorities must reference the Taxonomy when setting standards or labels for green bonds and sustainability initiatives.
The EU Taxonomy doesn't ban non-green activities, nor does it force investors toward specific assets. Instead it compels transparency, giving companies a standardised way to evidence their sustainability, and allowing capital to flow toward high-performing green transitions.
Activity guides
Plain-language guides to specific Taxonomy activities: what alignment requires, where DNSH scrutiny falls, and the documentation that supports an assessment. Each links straight into the tool with the activity pre-filled.
TTransitional activityEEnabling activity
Energy
Manufacturing
Transport
Buildings & Real Estate
Water Supply & Waste
Land Use & Forestry
Carbon Management
Information & Communication
More guides are being added; the assessment itself covers all 242 Taxonomy activities today.
Glossary
The terms you will meet in Taxonomy work and in our assessments, in plain language. Tap a term to expand it.
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