The European Commission has published a guide to the application of the EU Taxonomy (01.01.2023) (https://lnkd.in/dYKTZQgH).

The EU Taxonomy came into force as a classification system for sustainable green projects, ensuring that environmental criteria are applied to economic activities. For an economic activity to be considered sustainable according to the EU Taxonomy, it must support at least one of the EU's climate targets and not cause serious harm to the environment.

Within the scope of the EU Taxonomy, which is a transparency instrument, large companies have to report their economic activities. In this way, the sustainability performances of large companies will be compared more healthily by investors. Although the EU Taxonomy does not provide a mandatory framework for investors, it is thought that it will facilitate the preference of sustainable projects over time.

The EU Taxonomy is called a living document. In other words, a project that is currently considered sustainable may exit the system over time, or a project that is not considered sustainable may be included in the system.

The aims of the EU Taxonomy, which aims to create a common language for sustainable projects;

Facilitate companies' green transformation plans and access to financial resources

To prevent fragmentation in the market

To prevent greenwashing (laundering) activities

In order to fully understand the functions of the EU Taxonomy; It should be evaluated together with the "Corporate Sustainability Reporting Directive (CSDR)" and the "Sustainable Finance Reporting Regulation (SFRD)".

Companies covered by the CSDR have to report the conformity of their economic activities according to the EU Taxonomy. According to the SFRD, which came into effect on March 10, 2021, certain companies have an obligation to declare financial products' compliance with the Taxonomy.

With the EU Taxonomy, it is aimed to transfer especially new investments to financially sustainable projects. The establishment of a similar system in Turkey is very important in terms of accelerating the transfer of public and private investments to projects that are considered sustainable according to scientific criteria.

Part I – EU Taxonomy-What is EU Taxonomy?

Part II – Use of EU Taxonomy - How will companies use the EU Taxonomy?

Part III - Process and other policy development - What was the process leading to the adoption of the Taxonomy Climate Delegation Protocol and when will it be in effect?

**You can access the EU Taxonomy Guide Document (Turkish translation) here.