What is the EU Taxonomy?
The EU Taxonomy Regulation (Regulation (EU) 2020/852) establishes a classification system defining when an economic activity qualifies as “environmentally sustainable” for the purposes of EU sustainable finance regulation. The Taxonomy enables capital markets to identify and channel investments toward genuinely sustainable activities, reducing greenwashing risk in financial product labelling.
Six environmental objectives
- Climate change mitigation.
- Climate change adaptation.
- Sustainable use and protection of water and marine resources.
- Transition to a circular economy.
- Pollution prevention and control.
- Protection and restoration of biodiversity and ecosystems.
Four-step alignment test
- Substantial contribution to one of the six objectives, per Technical Screening Criteria (Climate Delegated Act 2021, Environmental Delegated Act 2023, Complementary Delegated Acts).
- Do No Significant Harm (DNSH) to any of the other five objectives.
- Minimum social safeguards compliance (OECD MNE Guidelines, UN Guiding Principles on Business and Human Rights, ILO Core Conventions).
- Technical screening criteria met for the specific activity (eligible + aligned thresholds).
Mandatory disclosures
- Non-financial undertakings (CSRD scope): disclose Taxonomy-eligible and Taxonomy-aligned share of turnover, capex, and opex.
- Financial undertakings: Green Asset Ratio (GAR) for banks; aligned investment share for asset managers.
- SFDR Article 8 and 9 funds: Taxonomy-aligned share disclosure.
Taxonomy alignment as market access
The EU Taxonomy matters to non-EU companies through capital and customers: EU funds, lenders and corporates report taxonomy alignment, and they push the data burden down to portfolio companies and suppliers. For Turkish companies, the practical exposure is questionnaires asking which activities qualify, against which technical screening criteria, with do-no-significant-harm and minimum-safeguards documentation. Discipline points: claim alignment only at the activity level the criteria define (not company-wide), keep the evidence file behind each claim, and version disclosures as criteria evolve. “Taxonomy-aligned” in a deck or sustainability report is a verifiable regulatory statement — treat it with prospectus-level care, because greenwashing review increasingly does.