Another instrument gaining increasing importance in the context of ESG and demanding more from non-financial and financial enterprises each year is the EU Taxonomy and Taxonomic Disclosures. They aim to enable the precise determination of companies' impact on the natural environment.
"Taxonomy" is a term that denotes the systematic classification and description of various elements (most commonly encountered in a biological context, where taxonomy allows us to categorize different organisms – into species, families, subfamilies, etc.).
In the ESG context, this term signifies the identification of specific categories of actions that impact sustainable development goals. Colloquially known as the "EU Taxonomy," it refers to the Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment – outlining the framework and conditions for actions that can be considered environmentally sustainable. It provides a uniform standard for classifying actions in line with sustainable development goals. Simultaneously, the Taxonomy obligates entrepreneurs to disclose the percentage of their turnover derived from sustainable activities and the percentage of their investments and operational expenses related to assets or processes associated with environmentally sustainable activities.
Taxonomic disclosures encompass various aspects, from identifying sustainable services, products, or investments to taxonomic disclosures related to financial products – which financial entrepreneurs must make. Disclosures may also cover the actions of financial institutions against climate change, biodiversity protection, or the promotion of energy efficiency.
Fot. Weronika Dyląg
The scope of disclosures has been limited until now. The year 2024 marks a year of full taxonomy alignment disclosures. For banks, demonstrating their portfolio's "green" nature requires obtaining Key Performance Indicators (KPIs) from non-financial entrepreneurs, assessing the alignment of a company's activities with the Taxonomy, and calculating the portion of exposure to clients associated with such activities. It will be a particularly challenging year, with increased data banks will need to acquire from an even more significant number of businesses subject to disclosure. This will undoubtedly be a technological challenge requiring well-designed tools.
The introduction of taxonomic disclosures, although requiring increased commitment from entrepreneurs and institutions, will contribute to increased transparency and comparability of information regarding sustainable activities. These data will help investors and consumers gain a more precise understanding of how entrepreneurs and financial institutions contribute to achieving sustainable development goals, enabling more informed investment decisions and facilitating social oversight of the impact of companies on the environment. Through taxonomic disclosures, companies can stand out and build their strategic advantage as genuine participants in the sustainable development market, minimizing the risk of greenwashing and building trust among their stakeholders.
