To make Europe climate-neutral in 2050 and achieve the goals of the 2015 Paris Agreement and the 2019 European Green Deal, the tone had to be set.

This has been the case since April 2021 with the European Taxonomy, a tool whose primary virtue will be to help companies and investors make decisions that are in line with the definition of sustainable investments. This European benchmark will now make it possible to establish a common benchmark for all real estate players in Europe, and will contribute to Europe’s ambition to become the first climate-neutral continent.

The Taxonomy is a toolkit for determining which economic activities are environmentally sustainable. It essentially targets private investments, directing them towards a climate-neutral, resilient and resource-efficient economy. It is a list of activities considered “sustainable”, including the technical criteria allowing them to be assessed as such. The European Taxonomy is already seen by the real estate sector as very promising in helping to redirect capital flows towards long-term and environmentally sustainable economic activities.

© Lily Banse

Crucial issues for the environment

Six criteria will now prevail in order to qualify an activity as “sustainable”:

• climate change mitigation
• adaptation to climate change
• protection of aquatic and marine resources
• transition to a more circular economy
• prevention and reduction of pollution caused by various industries
• protection and restoration of ecosystems.

An activity will be considered “sustainable” if it substantially contributes to one of these six objectives, without causing significant harm to any of the other five.

Redirecting financial flows

To respond to the current environmental, social and societal challenges, it was necessary to change the evaluation grid for business performance. In this respect, the taxonomy becomes the first analytical tool for linking financial and extra-financial information. It profoundly changes the criteria that will now determine whether a company is successful or not, and this will have a lasting impact on the entire financial world. It is these new European criteria that will now determine access to financing for companies, but also the way in which they will formulate their reporting.

What impact for investors and developers?

In a future article, we will determine, with a specialist in real estate investments, the consequences – but also the opportunities – of this new regulation for operators active in the international real estate market.

Tags: Environment, European Green Deal 2019, European taxonomy, green bonds, green finance, Paris Agreement 2015, real estate investors., sustainability, sustainable construction