EU Taxonomy: A Guide to Sustainable Investment Classification

Definition: The EU Taxonomy is a classification system established by the European Union to define which economic activities can be considered environmentally sustainable. It provides a clear and standardized framework to help investors, companies, and policymakers identify and support activities that contribute to the EU’s environmental objectives. The Taxonomy is a key tool in the EU’s broader strategy to achieve climate neutrality by 2050 and promote sustainable economic growth.
Purpose of the EU Taxonomy: The primary objectives of the EU Taxonomy are to:
• Promote Transparency: Offer a clear, science-based classification of what constitutes a sustainable activity.
• Prevent Greenwashing: Ensure that sustainability claims made by companies and financial products are accurate and based on established criteria.
• Guide Investment Decisions: Help investors make informed choices by identifying activities that genuinely contribute to environmental sustainability.
How the EU Taxonomy Works: The EU Taxonomy identifies six environmental objectives:

Climate change mitigation

Climate change adaptation

Sustainable use and protection of water and marine resources

Transition to a circular economy

Pollution prevention and control

Protection and restoration of biodiversity and ecosystems
For an economic activity to be classified as environmentally sustainable under the EU Taxonomy, it must:
• Substantially contribute to one or more of the six environmental objectives.
• Do no significant harm (DNSH) to any of the other objectives.
• Meet minimum social safeguards, such as those outlined by the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights.
EU Taxonomy and Hanseatic Alternative Investments: Hanseatic Alternative Investments is committed to aligning its investment practices with the principles and criteria set out in the EU Taxonomy. Our focus on sustainable real estate investments is a natural fit with the EU Taxonomy, particularly in the areas of climate change mitigation and adaptation.
Key Aspects of EU Taxonomy in Hanseatic Fund Investments:
• Energy-Efficient Buildings: The Hanseatic Sustainable Residential Real Estate Fund invests in properties that meet high energy efficiency standards, contributing to climate change mitigation by reducing greenhouse gas emissions.
• Sustainable Construction Practices: The fund prioritizes investments in developments that use sustainable building materials and practices, aligning with the Taxonomy’s objectives of promoting a circular economy and pollution prevention.
• Long-Term Value: By investing in assets that comply with the EU Taxonomy, Hanseatic ensures that its portfolio is future-proofed against regulatory changes and aligned with growing demand for sustainable properties.
Benefits of EU Taxonomy Compliance for Investors:
• Enhanced Transparency: Investors can be confident that the fund’s sustainability claims are based on rigorous, standardized criteria.
• Sustainable Returns: Investing in Taxonomy-aligned activities positions investors to benefit from the shift towards a more sustainable economy, potentially leading to long-term financial gains.
• Regulatory Compliance: As regulatory requirements evolve, Taxonomy-aligned investments are likely to be better positioned to meet future legal and market demands.
Why the EU Taxonomy Matters: The EU Taxonomy is a cornerstone of the EU’s sustainable finance strategy, and it has far-reaching implications for investors and companies alike. For investors, it offers a clear and reliable way to ensure that their investments contribute to the EU’s environmental goals. For companies, it provides guidance on how to align their operations with sustainability standards that will be increasingly important in the coming years.
Conclusion: The EU Taxonomy is a vital tool for promoting and identifying sustainable economic activities. At Hanseatic Alternative Investments, we are dedicated to ensuring that our investments align with the EU Taxonomy, particularly in the realm of sustainable real estate. By focusing on energy efficiency, sustainable construction, and long-term value, our fund not only meets regulatory standards but also supports the broader goal of transitioning to a more sustainable and resilient economy. Understanding the EU Taxonomy is essential for investors who wish to make informed, responsible, and future-oriented investment decisions.