SFDR and EU Taxonomy

The regulatory landscape to direct billions of euros into sustainable investing.

EU Taxonomy in a nutshell

The EU taxonomy is a manual that explains for each sector which economic activities are green and which are not. As from 2023, companies (with more than 500 employees) and investors are required to report on this taxonomy. This makes clear to what degree the company, project or investment portfolio complies with the EU Taxonomy. Or in other words, how green it exactly is.

The six environmental objectives of the EU Taxonomy

Climate change mitigation
Climate change adaptation
Sustainable use and protection of water and maritime resources
The transition to a circular economy
Pollution prevention and control
The protection and restoration of biodiversity and ecosystems

On 1 January 2023 it became mandatory for financial institutions to report on the first two environmental objectives. The other four are expected to be added in 2024.

EU taxonomy and our funds

As of 1 January 2023, financial institutions, including Triodos IM, are required to report what percentage of a fund's portfolio is aligned with the EU taxonomy. The European Commission introduced this requirement in order to be able to make transparent the percentage of environmentally sustainable investments in a fund clearly and unambiguously.

This reporting requirement is an important first step. We do note the following major issues, however:

The legislation is not yet complete. As of 1 January 2023, financial institutions are required to report on two of the six environmental objectives (see text box), i.e. what proportion of their assets they invest in activities that focus on climate change (both mitigation and adaptation). The other four objectives are expected to be added in 2024.
The EU classifies natural gas and nuclear energy as sustainable. Natural gas and nuclear energy are not sustainable and do not belong in a green taxonomy and certainly do not have a place in the investment funds managed by Triodos.
Limited availability of the required data from large corporations, because they do not have a reporting requirement until 2023. Small- and medium-sized companies will follow a few years later. Also, for the time being, the reporting requirement will only apply to companies that are registered in the EU.
A taxonomy for economic activities with a positive social impact is still lacking.

This means that the taxonomy-aligned percentage for the investment portfolios of several of our funds may still be very low.

Triodos Investment Management B.V. has the following information available, as required under the SFDR regulation (EU/2019/2088) on:

Our approach to impact, describing the integration of sustainability risks in our investment decision-making process as required under article 3 SFDR per December 2022.
A Principal Adverse Impact Statement as required under article 4 SFDR for the reference period 2023 (Published on 28 June 2024). A summary of this statement is available in English, Danish, Dutch, French, German, Italian, Norwegian, Spanish and Swedish.
Information on our remuneration policy and how that policy is consistent with the integration of sustainability risks as required under article 5 SFDR per 10 March 2021:

Triodos IM adheres to the International Remuneration & Nomination Policy (“Remuneration Policy”) of Triodos Bank Group. This policy is applicable to all Business Units of Triodos Bank Group. In the Remuneration Policy is disclosed how the remuneration business practice lies within the financial and sustainability risk appetite of Triodos Bank and is consistent with the integration of sustainability risks. An important aspect of the Remuneration Policy is that variable components are modest and are no incentives to favour the co-workers’ or the bank’s own interest to the detriment of Triodos Bank’s customers.

At Triodos IM, we have chosen to classify all our funds as “article 9 products”. For fund-specific SFDR disclosures, please visit the sustainability section of our fund pages.

Our views and updates

What's next for the SFDR?

Is the current wave of legislation friend or foe?

Triodos Investment Management proposes new investment categorisation system following SFDR

A deep dive into SFDR

How to manage impact

Article 8 is not good enough

Dirty funds: show your true colours

All Triodos IM funds designated as SFDR article 9 products

“A pivotal moment for our industry”

Current implementation of EU Taxonomy leads to distorted picture

Europe needs to show leadership: keep the taxonomy green

Current SFDR legislation jeopardises transition finance

Real impact also requires social outcomes

Toxic taxonomy

EU Taxonomy must remain meaningful and science-based

Why the EU is working on developing ‘An Oxford Dictionary of Sustainability'

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