What is the sustainability taxonomy and why it is a key element for the EU future? (Part 2)

La Seine à Pont de Marly, les piles de sable - Alfred Sisley

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This entry follows the previous entry (Part 1) on EU taxonomy, which can be read here. Continuing with the comments on the published documents, it should be noted that its development will be carried out through new technical annexes. These new documents will give content to the four objectives still to be completed, as well as through delegated acts. The delegated acts will detail the criteria for identifying the sustainability of each activity. 

The current taxonomy documentation leaves some questions open, so that in the next two years it will be decided how to proceed. In this regard, it will be reviewed whether to publish criteria on activities that are significantly harmful to the environment and whether to include the obligation to verify compliance with the procedures followed (in Spain, the non-financial information in the financial statements of certain companies must already be verified by third parties).

Another question that remains open is the possibility of modifying the classification of NACE activities, as the TEG has identified activities that do not have their own NACE. It should be noted that the classification of activities (and specifically NACE, as it is the used by the EU taxonomy) is the first step in the alignment analysis. For this reason, it will have to be updated in order to complete the rest of the objectives. 

Each of the six EU objectives will have its own substantial and enabling activities.

Until now, the EU taxonomy will basically affect three groups: (i) financial institutions, (ii) companies subject to non-financial reporting obligations and (iii) the EU and Member States in legislative measures.

In this second part on EU taxonomy, it is also important to highlight the possibility for companies to carry out taxonomy adaptation projects. As we saw in the first part, of the various activities of a company, some may be aligned with the taxonomy and others may not. The part referring to turnover, capex or alienated opex complies with the taxonomy, while the rest do not. Despite this, the company may approve an adaptation project of up to 5 years to align its activities with the taxonomy and this can be financed too with EU green bonds (100% of the capex needed for that adaptation project is aligned).