Navigating the ‘EU Taxonomy for sustainable activities’

What does it mean for pension funds and investment managers?

At 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 will come into force January 2022, 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.

Clarifying the green economy 

The goal of the EU Taxonomy requirement is to enable investors and other market participants to more easily understand to what extent investment products are exposed to the green economy.

Providers of financial products, offered in the EU, that pursue sustainable investment or promote environmental characteristics must demonstrate how they have used the Taxonomy and the proportion of underlying investments that are Taxonomy-aligned.

Additionally, for financial products that are not marketed as environmental or sustainable, investment managers will need to state that the products do not take the Taxonomy into account.

Classifying the green economy

FTSE Russell recognized the importance of a taxonomy, or a classification system, that can identify companies engaged in the transition to 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 (GRCS) provides definitions on green products/services in 10 sectors, 64 subsectors and 133 microsectors, which has a significant 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 indexes, including the flagship FTSE Global Equity Index Series and Russell US benchmarks.

Information for researched companies

Contact us to prepare for the EU green taxonomy

Find out more