Within that group, non-financial undertakings will need to disclose: This is achieved by amending the disclosure requirements in the EU’s Non-Financial Reporting Directive (NFRD) and the Sustainable Finance Disclosure Regulation (SFDR).Īny undertaking subject to the NFRD needs to disclose how, and to what extent, its activities are associated with activities that are considered as environmentally sustainable. For example, it requires certain entities to disclose information concerning the degree of alignment of their activities with the Taxonomy. While the Taxonomy is primarily a classification tool, it has other functions. The activity does not lead to carbon lock-in or hamper the development and deployment of low-carbon alternatives.Green House Gas emission levels correspond to the best performance in the sector or industry and.There are no technologically or economically feasible low-carbon alternatives.Transitional activities only qualify where the following criteria are met: Transitional activities must contribute to climate change mitigation and a pathway to keeping global warming in line with Paris Agreement commitments. They must also have a substantial positive environmental impact over the activity’s lifecycle. However, enabling activities cannot lead to a ‘lock-in’ of assets which would undermine long-term environmental goals. These were added to allow activities which may not otherwise have been considered sustainable to contribute to the overall objective of promoting sustainability.Įnabling activities allow other activities to make a substantial contribution to one or more of the Taxonomy’s six objectives. Within the activities that substantially contribute to one or more environmental objectives, the Taxonomy also defines two classification categories: enabling activities and transitional activities. For each activity, the TSC lay out thresholds to define compliance with do no significant harm. These TSCs are being elaborated in secondary legislation called Delegated Acts (DAs).įor an activity pursuing one or more of the six objectives to qualify as sustainable it cannot cause significant harm to any of the other Taxonomy objectives. Technical Screening Criteria (TSC) define the specific requirements and thresholds for an activity to be considered as significantly contributing to a sustainability objective. The six environmental objectives of the Taxonomy are: (1) climate change mitigation, (2) climate change adaptation, (3) sustainable use and protection of water and marine resources, (4) transition to a circular economy, (5) pollution prevention and control, and (6) protection and restoration of biodiversity and ecosystems.
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