EU taxonomy

The EU taxonomy is an EU classification system that defines which economic activities count as "environmentally sustainable".

6 environmental objectives:

1. Climate change mitigation (CO2 reduction)
2. Adaptation to climate change
3. Sustainable use of water
4. Transition to a circular economy
5. Pollution prevention
6. Protection of biodiversity

What this means for investors:

• Funds and ETFs must disclose how much of their investments are taxonomy-aligned
• An "Article 9 fund" has an explicit sustainability objective
• An "Article 8 fund" takes sustainability into account but isn't as strict

Controversy: the EU classified nuclear power and (under certain conditions) natural gas as "sustainable" – which was strongly criticised by environmentalists.