Your company can also benefit from the EU Taxonomy. We show examples of specific opportunities in three sectors

Companies that quickly find their way around Taxonomy can gain access not only to cheaper finance, but also to completely new business opportunities or clients. We provide an overview of specific opportunities for the real estate, manufacturing and waste sectors.

More business activities have been added to the EU's list of sustainable activities. In the summer, the European Commission adopted the so-called Environmental Delegated Act, which identifies activities that make a significant contribution to protecting water resources, moving to a circular economy, reducing pollution and promoting biodiversity. Until now, only activities contributing to climate change mitigation and adaptation have been defined. 

What is a Taxonomy

The taxonomy is the main guide for directing finance to sustainable projects. To be classified as sustainable under the Taxonomy, a business activity must meet the criteria for a significant contribution to one of the six objectives:

• Climate change adaptation and mitigation (criteria defined in the Climate Delegated Act, 2021),
• Protection of water resources, transition to a circular economy, reduction of pollution and promotion of biodiversity (new criteria defined in the Environmental Delegated Act, 2023)
  

It must also meet the so-called DNSH ("do no significant harm") criteria, which ensure that the activity does not have negative impacts on the remaining objectives. 

Last but not least, the company needs to demonstrate compliance with minimum safeguards to prevent or mitigate adverse social and environmental impacts throughout the value chain, which in practice means implementing a system of due diligence, or sustainability due diligence.

Real estate: green funds, bonds and banks

For companies involved in construction and real estate investment, Taxonomy is primarily an opportunity to access green finance. Banks have repeatedly declared that Taxonomy will be the main criteria for granting soft green loans. 

Another important opportunity is the increasing interest of real estate funds in green projects. Funds are now often looking for ways to green their portfolios in order to attract more investors, possibly to issue green bonds or to qualify as a green fund under the SFDR. In order to issue green bonds under the EU standard and to be classified as a fund under Article 9 of the SFDR, compliance with the Taxonomy needs to be addressed.

The main criterion for sustainable construction according to the Taxonomy is an energy performance 10% lower than the standard for near-zero energy buildings. Alternatively, a new building can have a worse energy performance (worst PENB "C") but must have a plan for adopting adaptation measures that substantially reduce the most significant physical climate risks, based on a professional assessment of the situation and monitored against predefined indicators (KPIs). Similarly, this applies to the acquisition of existing buildings.

What's new?

Companies now also have the option to comply with the Taxonomy by meeting the criteria for a significant contribution to the circular economy. One of these criteria, among others, is the use of secondary materials for construction in such a way that the three heaviest categories of building materials meet the maximum amount of primary raw materials (see table).

Source: Environmental Delegated Act, Annex II, s. 34

Other activities commonly carried out by real estate companies are also classified as sustainable, in particular the installation of renewable energy sources in buildings, insulation and the installation of technical equipment to increase energy efficiency and data monitoring.

"It pays for companies to map out what activities and criteria the Taxonomy contains, including the newly enacted Environmental Delegated Act. They may well find that some of the criteria are not difficult for them to meet and will thus be able to present their projects as Taxonomy-aligned, which will be an attraction for all investors in the coming years who have to report a proportion of such investments on a mandatory basis," explains Filip Gregor, senior ESG expert at Frank Bold Advisory.

Waste: new demand from construction and energy

While for building construction the opportunities lie primarily in more affordable financing, for waste management the Taxonomy creates entirely new business opportunities. Due to the Taxonomy's focus on circularity, some activities must meet the requirements for waste management and treatment within the DNSH criteria. At the same time, under the newly issued Environmental Delegated Act, a number of activities can meet the significant contribution condition just by complying with the waste management criteria. This creates a whole new demand for the waste management sector.

What will grow in demand?

Below you will find a list of examples of services and products that will be requested by companies wishing to comply with the Taxonomy in different sectors. 

• Recycling or re-using construction waste

• Secondary materials for building construction

• Share of recycled content in packaging

• Bio-waste for energy recovery

"In addition to meeting demand in other sectors, waste companies can focus purely on financing their own activities - there are many that qualify as sustainable in the waste management sector, " explains Gregor: for example, in areas such as waste collection and transport, waste decomposition and composting, material recovery or energy recovery of landfill gas, plastics production through mechanical or chemical recycling, etc.

Manufacturing: an opportunity to transform emissions-intensive industries

In the manufacturing sector, activities such as renewable energy production, energy efficiency equipment or battery production qualify as sustainable. However, the production of 'traditional' materials such as cement, iron or steel can also be classified as green according to the Taxonomy. The main criterion is compliance with emission limits.

"Even for so-called dirty companies, the Taxonomy presents an opportunity for transformation, especially as free emission allowances are coming to an end. From 2026 to 2034, the system of free allocation of emission allowances for sectors at risk of carbon leakage, i.e. relocation of production to countries with less stringent carbon rules, will be phased out, " explains Gregor of Frank Bold Advisory.

Read more in our article: Changes in free emission allowances: who will be affected and how to prepare for them?

These sectors include cement, iron, steel and aluminium production. Companies will therefore have a strong incentive to reduce emissions, and by meeting the Taxonomy criteria they will be able to enjoy the benefits of being classified as green.

As in the case of waste management, there will also be a new demand from manufacturing companies for low-emission materials such as cement or steel that meet the Taxonomy criteria. These materials will again be in demand for their projects, particularly from the construction sector, which needs low-emission materials to reduce its Scope 3 indirect emissions.

Need to navigate Taxonomy and access cheaper finance?

We will map out for you what activities and Taxonomy criteria apply to you. We will help you set targets for ESG reporting and implement the whole process in your company.