29 March 2022

The Platform: Environmental Taxonomy: Final Report on Taxonomy extension options supporting a sustainable transition

The Taxonomy focuses on the performance levels of activities that are making a substantial contribution (SC) to the EU’s environmental objectives while doing no significant harm (DNSH) to any of those objectives and meeting minimum social safeguards.

Executive summary
A Taxonomy for transitions across the economy
The European Union’s original ‘green’ and sustainable finance Taxonomy (‘the Taxonomy’)
has been developed to provide investors, governments and many other organisations within
the EU with a science-based classification system to use in financial decisions responding to
the global climate and environmental emergency. Its aim is to provide robust definitions and
transparent reporting to support increased finance for activities that substantially contribute to
solving climate and environmental crises.

The Taxonomy’s substantial contribution criteria can be challenging to achieve because
Europe’s environmental goals are challenging to achieve, and directing more finance to the
green transition is essential. But many sectors of the economy included in the Taxonomy must
transition to more sustainable models even if they cannot reach the green performance level
defined by the Taxonomy criteria. Moreover, some activities may not be included in the
Taxonomy, either because they have no sustainable transition options or because they are
low-impact activities. All these activities need specific finance for urgent investment to make
the specific transition needed in their case, which can range from activities that must transition
away from significantly harmful (SH) performance levels (e.g. inefficient gas-fired power
production and conventionally powered vehicles) through to activities with a low environmental
impact and no likelihood of making a substantial contribution to environmental objectives (e.g.
the provision of accounting services to small businesses or childcare).

The current Taxonomy leaves a wide variety of economic activities non-classified. Some
stakeholders may incorrectly interpret this non-classification or “not green” as a negative signal
and there are fears that finance would simply dry up for activities that fall outside the current
Taxonomy. However, the current design of the Taxonomy does not intend to convey a
negative signal over all these other non-aligned or not-included activities, it simply started with
the key priority to provide clarity on green classifications at the top end of environmental
performance levels.

Since the proposal of the Taxonomy Regulation (TR), it has become increasingly clear that
many Taxonomy users could benefit from an extension of the Taxonomy framework to
introduce other performance levels. Doing so would enhance transparency and would also
allow for more nuanced decision-making and lend wider support to an environmental transition
in the whole economy. The Taxonomy Regulation requires the European Commission to
deliver a report on the possible extension of the Taxonomy to other economic activities. This
report constitutes the Platform’s input to the European Commission’s forthcoming report under
Article 26, and additionally, it provides clear signals to and recommendations for financial markets and other stakeholders....

more at Platform on sustainable finance

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