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What does the EU taxonomy means for your real estate?

With the Paris climate agreement and growing regulation from the EU, sustainable real estate is becoming more important than ever. The EU Taxonomy is a science-based classification system that is expected to become the global standard in assessing whether an economic activity is sustainable or not. The purpose of Taxonomy is to guide and align investments with the EU's climate goals.

The EU Taxonomy would give investors more assurance and protection, help companies become more climate-friendly and allow investments to be moved to where they are most needed. The first obligation arising from this started from the first of January 2022 and, for now, concerns an annual reporting requirement for organisations offering financial products and public interest enterprises (PIEs) with more than 500 employees.

Want to know more about EU Taxonomy? Check out our FAQ EU Taxonomy!

Taxonomy applies to all

Smaller organisations will also have to adopt it soon and would do well to take up the criteria voluntarily at this stage, for instance by giving direction to their ESG strategy. With an ESG report, they can demonstrate the extent to which they are already in line with the EU Taxonomy and thus respond directly to changing market demand.

The EU Taxonomy has six environmental objectives, two of which have already been developed into concrete criteria:

(1) the mitigation and (2) adaptation of climate change;
(3) the sustainable use and protection of water and marine resources;
(4) the transition to a circular economy;
(5) the prevention and control of pollution;
(6) the protection and restoration of biodiversity and ecosystems.

Currently, only the first two objectives have developed criteria for assessing whether an economic activity complies with the taxonomy. During 2022, the criteria for the remaining targets are also expected to be published. From 1 January 2023, another extension of obligations is expected.

Is your real estate investment Taxonomy proof?

Want to know if your real estate investment meets the new Taxonomy requirements? Get in touch with the specialists at SGS Search!

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