EU Taxonomy for Sustainable Activities

An activity qualifies if it makes a substantial contribution to at least one of six environmental objectives, does no significant harm to the others, and meets minimum social safeguards. Technical criteria for each sector set thresholds, for instance for emissions per unit of output. Companies in scope report how much of their turnover, capital spending and operating spending is eligible and how much is aligned. Financial firms use these figures to disclose their own alignment and in fund disclosures. The Taxonomy is a classification tool, not a rating of companies and not a ban on other activities. Other countries have built or are building similar taxonomies, so the concept is wider than the EU rulebook. A green claim about an activity can then be checked against published criteria, instead of resting on the company's own description.

A manufacturer of heat pumps reports under the Taxonomy. Of its turnover, 80% comes from products that meet the technical criteria for energy efficiency, and the company has evidence that it meets the do-no-significant-harm and safeguards tests. It therefore reports 80% as aligned, and a fund holding its shares counts that share towards its own figure.