The EU Taxonomy for Sustainable Activities is a regulatory framework for the classification of economic activities based on their environmental impact and sustainability. Activities are classified based on whether they significantly contribute or cause harm to six overarching environmental objectives.
The Taxonomy plays a central role in the EU Green Deal by creating sustainability criteria for economic activities that can have a high impact on the environment. The Taxonomy is connected to various other sustainable finance disclosure regulations being released by the EU.
Companies under the scope of the NFRD, soon to be substituted by CSRD have to report which proportion of their Turnover, CapEx and OpEx can be considered green or "Taxonomy-aligned". Financial market participants marketing financial products as sustainable have to disclose Taxonomy alignment percentages of their portfolios. Finally, credit institutions have to calculate the Green Asset Ratio which relies on Taxonomy analysis.