Navigating the ‘EU Taxonomy for sustainable activities’

What does it mean for pension funds and investment managers?

Just before the end of 2019, the European Parliament and the Council agreed that financial products on sale in the EU will have to reference the EU Taxonomy. Requirements relating to climate-related objectives are due to apply from December 2021, while criteria for other aspects of the green economy, such as water, waste, biodiversity protection and the circular economy, are due to apply at the end of the following year.

When marketing environmental or sustainable funds, European investment managers will have to disclose:

How, and to what extent, they have used the Taxonomy to assess the sustainability of underlying investments;
What environmental objectives the investments are contributing to; and
The proportion of underlying investments that are included in the Taxonomy.

For funds that are not marketed as environmental or sustainable, European investment managers can state that they do not take the Taxonomy into account.

The aim is to enable investors and other market participants to more easily understand to what extent investment products are exposed to the green economy.

Resources to understand the EU Taxonomy

Classifying the Green Economy

FTSE Russell recognized the importance of a Taxonomy, or a classification system that can demonstrate investment opportunities in a green economy. Since 2009, we have been working on Green Revenues data to identify companies with green economic activities. The associated FTSE Russell Green Revenues Classification System provides definitions on green products/services in 10 sectors, 64 subsectors and 133 microsectors, which has strong alignment with the EU Taxonomy.

The data model covers over 16,000 listed companies across 48 developed and emerging markets. Building on the data, we’ve managed to capture the transition to the green economy in various index series, including the key FTSE Global Equity Index Series and Russell US benchmarks.

FTSE Russell’s Green Revenues Classification System

green revenue classification system

Insights and trends into the global green economy

Until now the transition to a sustainable and “green” economy has been a loose concept rather than a defined, investable, industrial system. This lack of definition and data has led to the impression that it is of limited size; small cap dominated; lacking diversification and that investors give up performance in exchange for environmental benefits. However, analysis by FTSE Russell dispels these stereotypes. It finds a large investment opportunity, backed by global efforts to combat climate change and broader environmental challenges.

Indexes

Analytics

Data

Events

Navigating the ‘EU Taxonomy for sustainable activities’

Resources to understand the EU Taxonomy

Classifying the Green Economy

FTSE Russell’s Green Revenues Classification System

Insights and trends into the global green economy

Investing in the global green economy: Busting common myths

Report

Busting the myths of the green economy transition

Webinar

Investing in a low carbon economy

Responsible Investor webinar

Information for researched companies

LSEG Guidance on Green Finance

Sustainable Investment Data platform

Contact us to prepare for the EU green taxonomy