EU Taxonomy is being incorporated into a growing number of legislative frameworks
Meng Beniard
Senior Manager, Sustainability Services
The EU Taxonomy is becoming a core element of sustainable finance regulation, setting a common standard for what qualifies as environmentally sustainable activity across the EU. Its influence is expanding through integration into major legislative frameworks such as the SFDR, EBA Pillar 3, and the EU Green Bond Standard.
1. SFDR: Investment Funds Must Report EU Taxonomy Alignment
Under the current Sustainable Finance Disclosure Regulation (SFDR), investment funds classified under Article 8 or 9 are required to disclose the proportion of their portfolios that are aligned with the EU Taxonomy. With the upcoming SFDR reform (expected in Q4/2025), it is anticipated that all investment funds will need to report the taxonomy eligibility of their investments.
What does this mean in practice?
Companies seeking investments from funds must understand and be able to demonstrate how their operations align with the EU Taxonomy, as this information could become a key prerequisite for receiving fund investments.
2. EBA Pillar 3: Banks Must Demonstrate the Sustainability of Their Financing
Under Pillar 3 regulation, the European Banking Authority (EBA) requires banks to disclose, using the Green Asset Ratio (GAR) and Banking Book Taxonomy Alignment Ratio (BTAR) indicators, how much of their financing is directed towards environmentally sustainable activities under the EU Taxonomy.
What does this mean in practice?
This leads banks to request EU Taxonomy-related data from their corporate clients – even if those companies are not otherwise publicly reporting this information.
3. EU Green Bond Standard: Green Bond Proceeds Must Fund Taxonomy-Aligned Projects
Under the EU Green Bond Standard, at least 85% of the proceeds from a green bond must be allocated to projects aligned with the EU Taxonomy. This makes the taxonomy a benchmark for green investments and ensures a science-based use of funds.
What does this mean in practice?
For companies, the EU Green Bond Standard means that issuing a green bond requires the identification of taxonomy-aligned projects. This increases transparency and credibility – and can help secure green financing in a competitive market.
What’s the key takeaway?
The EU Taxonomy is quickly becoming the standard for what counts as sustainable. If your company wants to attract investment or loans—or just show customers you’re serious about sustainability – it’s a good idea to start looking at how your business matches up with these new rules. This will help you stay ahead as the EU’s sustainable finance landscape continues to evolve.
In this series of articles, our expert Meng Beniard explains what the changes around the EU taxonomy mean for businesses today and in the future, and offers concrete tips for action.
Read the first part of the series here: What Does the Omnibus Package Mean for EU Taxonomy Reporting?
Published 06.06.2025