The EU Sustainable Finance Taxonomy is a classification system developed by the European Commission. It defines environmentally sustainable economic activities to support the European Union’s climate and environmental objectives.

The tool is designed for investors, companies, financial institutions, and policymakers. It provides a structured framework for assessing sustainability performance, ensuring consistency and comparability across financial markets.

Finance professionals can use the taxonomy to identify sustainable investments and align financial decisions with regulatory requirements. It helps institutions comply with the EU Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD). This improves transparency and reduces greenwashing risks.

The tool supports risk assessment by providing clear criteria for determining whether economic activities contribute to environmental objectives such as climate change mitigation and adaptation. This enables financial professionals to integrate sustainability into investment strategies and manage regulatory compliance effectively.

By standardising sustainability reporting, the taxonomy enhances market credibility and investor confidence. It also facilitates access to sustainable finance by guiding capital towards environmentally responsible projects.

Finance professionals involved in asset management, lending, risk assessment, and corporate reporting can use the Taxonomy to ensure investments align with EU sustainability targets. It aids in decision-making, reporting, and regulatory adherence, supporting the transition to a low-carbon economy.