Climate change is the most pressing issue of our time. It is already having an immense impact on people’s lives, their livelihoods, and the environment. Our eu taxonomy aligned economic activities have a major role to play in either exacerbating or mitigating the impacts of climate change. Aligning economic activity with climate and environmental objectives is essential if we are to reduce emissions, protect biodiversity, provide clean air and water, promote sustainable use of resources, increase resilience to extreme weather events and ensure human rights and labour standards are respected.
Taxonomy alignment has been identified as one way to achieve this goal. Taxonomy alignment refers to an eligible economic activity that is making a substantial contribution to at least one of the climate and environmental objectives while also doing no significant harm to the remaining objectives and meeting eu taxonomy aligned minimum standards on human rights and labour standards.
This approach uses a set of criteria – such as specific environmental metrics – against which companies can assess whether they are contributing positively towards each objective or not. The aim is for companies’ activities across all sectors – from agriculture through energy production, manufacturing processes up until services provision such as finance – all need be assessed against these eu taxonomy aligned criteria in order for them to be considered eligible for taxonomy alignment purposes.
There are three main types of taxonomy alignment: (1) direct investment; (2) indirect investment; (3) non-investment related activities such as loans or financial advice provided by banks or other financial institutions that do not involve investing in any particular eu taxonomy aligned project but support green transitions more generally through financing energy efficiency projects or renewable energy sources like wind power plants instead of fossil fuel based plants etc..
Direct investments involve investing directly into projects that have been identified by authorities/institutions as being part of an aligned eco-system/taxonomic system i.e., those deemed eligible under Europe's Sustainable Finance Disclosure Regulation (SFDR). Projects must meet certain eu taxonomy aligned sustainability criteria before they can be considered ‘aligned’ according to relevant regulations; therefore it will take into account certain aspects related both with respect to environmental impact but also additional elements such as human rights due diligence practices etc.
Examples include investing into renewable energy sources like solar parks rather than coal plants; sustainable forestry initiatives rather than illegal deforestation practices etc.. Indirect investments involve investing into funds which themselves invest directly into projects which meet sustainability criteria mentioned earlier but without necessarily having direct control over underlying assets/projects within these eu taxonomy aligned funds namely where investors cannot know what type of underlying asset comprises a fund's portfolio beyond its general description i .e considering only general information about it given by asset manager when deciding whether it fits investor's preferences with regard sustainability matters.
Non-investment related activities refer mainly hereto actions taken by banks/financial institutions providing financial advice/loans for energy efficiency improvements within buildings or other similar green transition initiatives without actually involving any sort kind investment process per se but still contributing towards their clients' long term transition plans towards becoming more environmentally friendly entities.
In addition there needs also be assurance that when aligning economic activities with climate objectives this does not happen at expense workers' rights especially where lack clear regulation regarding eu taxonomy aligned labour conditions exists due potential risks exploitation may arise if left unchecked, this means measures need taken prevent risk exploitation occurring e . g introducing external third party independent verification schemes audit working conditions regularly ensuring compliance minimum standards code conduct established applicable laws regulations.
Furthermore international organizations bodies created help build greater transparency accountability industries ensuring fairer less exploitative working conditions instance ILO International Labour Organisation provides global framework promote decent work opportunities people around world , including implementing principles fundamental conventions covering key areas related employment issues child labour forced slavery freedom association collective bargaining.
The importance aligning economic activity with both climate & environment objectives alongside respecting human right & labour standard cannot underestimated going forward , since only way ensure long term sustainability our eu taxonomy aligned communities economies planet whole balancing out interests multiple stakeholders involved process taking place fairly responsibly manner possible. Only then can we truly make positive progress addressing some of the biggest challenges facing the world today!