EU taxonomy
Making sustainability visible: The EU sets consistent criteria for a sustainable economy.
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.
Six environmental objectives are in focus:
- Climate change mitigation
- Climate change adaption
- Sustainable use and application of water or marine resources
- Transition to a circular economy
- Pollution prevention or control
- 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.
Extensions and adjustments to the Taxonomy Regulation are made at least every three years as part
of updates and reviews.
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 also results
in new reporting obligations for financial institutions. From 2024, financial institutions must disclose
the green asset ratio, among other things. This describes the share of taxonomy-aligned assets in
taxonomy-relevant assets (excluding business with specific counterparties from total assets).
Application of the EU taxonomy at Commerzbank
Commerzbank aims to reduce the CO2 emissions of its loan and investment portfolio to net zero by 2050 at the latest. This target stems, among other things, from the European Green Deal, which aims to shape the transition to an economy with zero net greenhouse gas emissions.
Industry and business, of our customers, are also facing an enormous transformation toward greater sustainability. 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 define which financial transactions we define as transformation finance and which as sustainable finance. The requirements of the EU taxonomy are taken into account in this classification.
We classify all portfolio components that are not affected by our exclusion criteria as transformation finance. Based on our holistic understanding of sustainability, we already include exposures in our definition of Sustainable Finance that fulfil social purposes or go beyond the existing environmental criteria of the EU taxonomy. As the EU taxonomy evolves, we will continuously review our parameters and adapt them to EU regulation where necessary.