EU Taxonomy - Progress on the Journey to Alignment
The EU Taxonomy is ramping up to become the “common green standard” used to credentialize companies’ green revenue and capex as well as investors’ green investments. With the initial climate phase of the Taxonomy having taken effect, Goldman Sachs Research sees 2022 becoming a critical period of experimentation and engagement between investors and corporates around disclosures and alignment-estimation models leading up to full Taxonomy application from January 1, 2023. Corporates’ and investors’ ability to navigate the complexities and challenges with assessment and reporting will be critical to the EU Taxonomy’s ultimate success. Rising pressure to follow the Taxonomy has led to growing adoption that will, in turn, influence capital allocation, cost of capital and company valuations. Additionally, as market sentiment potentially shifts towards supporting ESG improvers, the Taxonomy could help provide basis for owning companies in transition.