Climate change is arguably the greatest challenge the world currently faces. Delivering on the 2015 Paris Agreement goal to limit global warming to 1.5°C-2°C compared to pre-industrial levels will require enormous investment and this evolution has created a need for a common classification system for sustainable economic activities. In Europe this is known as the EU Taxonomy.

Its goal is to help companies plan the transition, to mitigate market fragmentation and to protect private investors from so-called ‘greenwashing’ – where sustainability ambitions and language are not matched by action and outcomes. The Taxonomy sets out a framework to facilitate sustainable investment, to support the EU’s climate and energy targets for 2030 and to reach the objectives of the European Green Deal.

This paper focuses on the EU Taxonomy framework and on some key aspects of other regulation, to highlight how the Taxonomy can be an opportunity for asset managers whether by facilitating our assessment of companies’ sustainability, or by underpinning the design of sustainable products or funds.

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