What is EU Taxonomy?

EU Taxonomy is a financing tool developed by the EU to reach the objectives of the European Green Deal. In practice, it 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, entered into force on 12 July 2020, will have direct implications to forest managers and owners, who wish to label their assets green in the future.

The Taxonomy sets out sector-specific technical screening criteria developed by the Technical Expert Group (TEG), which will be used to verify the sustainability of investments and their compliance with the EU Taxonomy.

General Requirements

To establish to which degree an investment is environmentally sustainable, and that the underlying economic activity of the investment qualifies as environmentally sustainable, the economic activity should meet the following general requirements:

  1. contributes substantially to one or more of the environmental objectives;
  2. does not significantly harm any of the environmental objectives;
  3. is carried out in compliance with the minimum safeguards; and
  4. complies with technical screening criteria that have been established by the Commission.

Implementation Timeline

Forestry Context

In our view, immediate implications of the EU Taxonomy to forest sector are:

  • Increased reporting requirements on carbon stocks
  • Increased reporting requirements on sustainable forest management
  • Specifically, in the absence of a forestry certificate, the requirement to demonstrate compliance with SFM requirements.

The investor will be required to identify the proportions of different asset categories within their investment.

Indufor’s references:

  • 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 also environmental and social due diligence.

Link to the EU Taxonomy website.

Area Experts

Jarno Seppälä

Managing Director, Head of Forest Industry & Bio Solutions Consulting

Anni Blåsten

Marketing Manager, Senior Consultant

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