EU taxonomy
Making sustainability visible: The EU Taxonomy provides standardised criteria for evaluating the sustainability of economic activities.
Sustainability and ESG are widely used terms. Sustainability describes a forward-looking perspective in which environmental, social and economic aspects are considered over the long term in order to preserve the foundations of life and business for future generations. In the corporate and financial sectors in particular, these aspects are commonly summarized under the term ESG (Environmental, Social and Governance). Sustainability is defined differently across regulatory, scientific, and economic contexts. Regulatory requirements, such as the EU Taxonomy or the EU Sustainable Finance Disclosure Regulation, provide a framework for individual sustainability aspects while leaving room for company-specific specification.
The specific meaning of sustainability for Commerzbank AG’s products, services, and business activities is set out in the ESG Framework. It defines the relevant criteria and distinguishes, in particular, between the Bank’s own business and external client investment and insurance business, including asset management and securities business (“third-party business”).
What is the EU taxonomy?
The EU taxonomy is a classification system for assessing the environmental sustainability of certain economic activities. It is part of the EU ,,Action Plan for Financing Sustainable Growth'' presented in 2018 and thus part of the ,,European Green Deal'' which aims to shape the transition to a net-zero emissions economy by 2050. The Taxonomy Regulation serves as a central instrument for the targeted steering of capital flows into sustainable and transformative economic activities. Consistent criteria increase transparency and thus counteract greenwashing.
The European Commission has published the taxonomy-eligible economic activities and the corresponding criteria: EU Taxonomy Navigator
Six environmental objectives are in focus:
- 1.Climate change mitigation
- 2.Climate change adaption
- 3.Sustainable use and application of water or marine resources
- 4.Transition to a circular economy
- 5.Pollution prevention or control
- 6.Protection and restoration of biodiversity and ecosystems
According to the EU taxonomy, an economic activity is only environmentally sustainable if it contributes substantially to at least one of the six environmental objectives listed in the regulation without significantly harming any of the other environmental objectives (Do No Significant Harm). In addition, minimum social standards must be met. This is assessed based on criteria defined by the European Union.
How are banks affected?
The Taxonomy Regulation is directly applicable to the classification of economic activities and financial products and is therefore also relevant for banks. In addition, the EU taxonomy results in reporting obligations for financial institutions. Since 2023, financial institutions must disclose the green asset ratio, among other things. This describes the share of taxonomy-aligned assets in taxonomy-relevant assets.
Application of the EU taxonomy at Commerzbank
We aim to achieve net-zero financed CO2 emissions in our loan and investment portfolio by 2050. We have joined the Science Based Targets initiative (SBTi) to calculate and set the target. To the Implementation Plan
Industry and business, of our customers, are also facing an enormous transformation. There is no company that will not be directly or indirectly affected by it sooner or later. For this reason, the EU taxonomy is also taken into account in our ESG framework. In this framework we specify which financial transactions we define as General Finance and which as Sustainable Finance. The requirements of the EU taxonomy are one of the elements of this definition.
Based on our holistic understanding of sustainability, we already include assets in our definition of sustainable finance that, e.g. fulfill social purposes and thus go beyond the criteria of the EU taxonomy. As the EU taxonomy evolves, we will continuously review our parameters and adapt them to EU regulation where necessary.