호서대학교 AI녹색금융공학과

A Compass for Green Economic Activity: Green Taxonomy

Green taxonomy is a clear framework for determining which economic activities are environmentally sustainable.
It is the standard language of green finance that directs capital to eco-friendly projects, prevents greenwashing, and supports carbon neutrality.

Green taxonomy as a compass for green economic activity

Importance of Green Taxonomy

Importance 1

Criteria for Investment Decisions

It serves as an objective benchmark for financial institutions to verify whether a business
contributes to the environment when making loans or investments.

Importance 2

Preventing Greenwashing

It filters out superficially green businesses and protects investor confidence.

Importance 3

Global Regulatory Response

Companies that do not comply with EU and Korean (K-Taxonomy) standards may face disadvantages
in attracting global capital and exporting.

Korean Green Taxonomy (K-Taxonomy)

K-Taxonomy announced by the Korean government defines economic activities that contribute to six environmental objectives, reflecting Korea’s industrial structure.

Six Environmental Objectives

GHG Reduction

(Decarbonization)

Climate Change Adaptation

(Adaptation)

Sustainable Water Management

(Water Stewardship)

Transition to Circular Economy

(Circularity)

Pollution Prevention and Control

(Pollution Control)

Biodiversity Conservation

(Biodiversity)

Assessment Criteria

1

Contribution

Must substantially contribute to at least one of the six environmental objectives

2

DNSH

Must not significantly harm other environmental objectives (Do No Significant Harm)

3

Safeguards

Must comply with laws related to human rights, labor, and safety

The Global Standard: EU Taxonomy

The EU Taxonomy is the world’s first green classification system established by the European Union to determine which economic activities are environmentally sustainable.
It has become the foundation of global green finance guidelines, and K-Taxonomy was also designed based on EU standards.

Six Environmental Objectives of the EU Taxonomy

Climate Change Mitigation

(GHG reduction, etc.)

Climate Change Adaptation

(Climate disaster preparedness, etc.)

Sustainable Use of Water and Marine Resources

(Water quality improvement, marine ecosystem conservation, etc.)

Transition to Circular Economy

(Resource recycling, etc.)

Pollution Prevention and Control

(Air and water pollution reduction, hazardous substance management, etc.)

Biodiversity and Ecosystem Restoration

(Endangered species protection, forest and wetland restoration, etc.)

Three Core Conditions for Eligibility

To be recognized as eligible under the EU Taxonomy, all of the following strict conditions must be met.

1

Substantial Contribution

Must substantially contribute to at least one of the six objectives above.

2

Do No Significant Harm (DNSH)

Must not cause significant harm to any of the remaining five objectives while contributing to one.

3

Minimum Safeguards

Must operate in compliance with international norms on human rights, labor rights, and related matters.