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.