On June 18, 2019 the EU expert group for sustainable finance (TEG) published a proposal for a European definition of environmentally sustainable activities. The taxonomy is best compared to a green encyclopedia for financial market participants. An encyclopedia that provides guidance to investors that are looking to finance the transition to an economy in line with the goals of the Paris Climate Agreement.

The TEG’s proposal is a major step towards a European definition of sustainable economic activities. It has the potential to be a real game changer in the long term through more transparency, lower transaction costs and better dialogue between investors and investees.

Standardisation as an accelerator

The Dutch financial sector has long been active in responsible investment and standardisation of the market for sustainable investments. As a large €250 billion ($280 billion) pension asset owner and asset manager PGGM and PFZW have been using a taxonomy for impact investments for almost 10 years. The taxonomy for impact investments was developed by a team within PGGM and was initially aimed at four impact themes: climate change, water scarcity, healthcare and food security. Three years ago this initial taxonomy was extended to a taxonomy for investments in the UN Sustainable Development Goals, in cooperation with APG. Based on our experience and as the only representative of the pension sector, we were able to play an active role in the TEG and the development of the EU taxonomy.

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