The Taxonomy Regulation and its Implementation (Third fully updated edition, January 2024).

44 Pages Posted: 8 Mar 2023 Last revised: 19 Jan 2024

See all articles by Christos Gortsos

Christos Gortsos

National and Kapodistrian University of Athens; EUSFIL Jean Monnet Centre of Excellence

Dimitrios Kyriazis

University of Oxford

Date Written: March 8, 2023

Abstract

The EU Taxonomy Regulation (TR), adopted in 2019, is a key milestone in defining legally sustainable activities. It should be viewed within the context of the climate and energy targets set by the EU for 2030 to become climate-neutral by 2050, and constitutes, along with the Sustainable Finance Disclosure Regulation (SFDR) and the Low Carbon Benchmarks Regulation (LCBR), the regulatory ‘trilogy’ implementing the CMU Action Plan in relation to sustainable finance. It substantially builds on the 2020 Report of the Technical Expert Group on Sustainable Finance (TEG), which developed the “EU taxonomy” classification system to determine whether an economic activity can qualify as environmentally sustainable. The system of its rules is anchored in the definition of six specific environmental objectives, which constitute the benchmark on the basis of which an economic activity can be assessed to qualify as environmentally sustainable and, hence, the degree to which a financial investment is environmentally sustainable is established. The main purpose of this Chapter is as follows:
First, it thoroughly analyses the subject matter and scope of the TR, with an emphasis on its environmental objectives. It sets out the primary EU law limits within which it applies, while also explaining its contribution to internal market-making as a harmonisation measure. Second, it examines the criteria for determining whether an economic activity qualifies as environmentally sustainable, while also delving deeper into the requirements of the technical screening criteria. Third, and in connection to the above, the Chapter assesses the Delegated Acts adopted on the basis of the TR and mentions those yet to be adopted. More specifically, two new Delegated Acts were approved by the Commission in June 2023, and have been transmitted to the co-legislators for their scrutiny pursuant to Article 290(2) TFEU. Once the scrutiny period is over, and assuming neither of the co-legislators objects, the Delegated Acts will enter into force and apply as of January 2024. The Chapter also discusses the Commission’s Communications in relation to said Delegated Acts. Moreover, it examines the EU Commission’s most recent sustainable finance package (June 2023), which consists of four main pillars and includes a new set of measures to build on and strengthen the foundations of the EU sustainable finance framework. Fourth, the Chapter presents in detail the disclosure requirements for environmentally sustainable investments, and sets out the role played by, inter alia, the Platform on Sustainable Finance and the Member State Expert Group on Sustainable Finance. Finally, it remarks on the impact of the TR so far and on the next steps forward, while also briefly commenting on TR-related litigation before the EU Courts, which is already under way.

Keywords: EU Sustainable Finance Law, Taxonomy Regulation, Sustainable Finance Disclosure Regulation, Low Carbon Benchmarks Regulation, Capital Markets Union, Action Plan on Financing Sustainable Growth, Corporate Sustainability Reporting Directive, Climate Delegated Act, Disclosures Delegated Act, Environmen

JEL Classification: E50, E53, E58, G21, G28. K00, K23, K33

Suggested Citation

Gortsos, Christos and Kyriazis, Dimitrios, The Taxonomy Regulation and its Implementation (Third fully updated edition, January 2024). (March 8, 2023). European Banking Institute Working Paper Series 2023 - no. 136 , Available at SSRN: https://ssrn.com/abstract=4381950 or http://dx.doi.org/10.2139/ssrn.4381950

Christos Gortsos (Contact Author)

National and Kapodistrian University of Athens ( email )

EUSFIL Jean Monnet Centre of Excellence ( email )

Italy

Dimitrios Kyriazis

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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