What is EU Taxonomy?
EU Taxonomy is a financing tool developed by the European Union to achieve European Green Deal objectives. In practice, EU Taxonomy is a tool to help investors, companies, issuers and project promoters navigate the transition to a low-carbon, resilient and resource-efficient economy. EU Taxonomy Regulation (EU) 2020/852, which entered into force on 12 July 2020, has direct implications for forest managers and owners who wish to label their assets “green.”
The Taxonomy establishes sector-specific technical screening criteria developed by the Technical Expert Group (TEG), which are used to verify the sustainability of investments.
To assess an investment’s degree of environmental sustainability and determine whether the investment’s underlying economic activity is environmentally sustainable, the action should meet the following requirements:
- contributes substantially to one or more of the environmental objectives;
- does not significantly harm any of the environmental objectives;
- is carried out in compliance with minimum safeguards; and
- complies with technical screening criteria that have been established by the Commission.
EU Taxonomy’s immediate implications for the forest sector are:
- Increased reporting requirements on carbon stocks
- Increased reporting requirements on sustainable forest management
- In the absence of a forestry certificate, demonstration of compliance with sustainable forest management (SFM) requirements.
- Investor identification of the proportions of different asset categories within a particular investment.
The investor will be required to identify the proportions of different asset categories within their investment.Indufor’s Experience:
- Review of EU Taxonomy with a focus on technical screening criteria for a private client
- Review of EU Timber Regulation for the European Commission
- >100 due diligence projects on forest assets and downstream processing including environmental and social due diligence.
Link to the EU Taxonomy website.