The European taxonomy: what is it?

The European taxonomy is a regulatory framework developed by the European Union to classify economic activities that have a positive impact on the environment. Its main objective is to facilitate the transition to a greener, more sustainable economy by identifying the sectors and companies most involved.

The taxonomy is based on six environmental objectives:

1. climate change mitigation
2. adapting to climate change
3. protection and sustainable use of water and marine resources
4. the transition to a circular economy
5. pollution prevention and control
6. protecting and restoring the biodiversity of ecosystems

This initiative is aimed primarily at large companies with more than 500 employees and financial institutions, which play a crucial role in financing and implementing economic projects.

The building industry: a hard-hit sector

Of the ten sectors impacted by the European taxonomy, the building industry occupies a prominent place. Buildings have a significant impact on the environment, from construction to day-to-day use: collective or individual housing, offices and shops, warehouses, hotels, schools and museums.

The property sector accounts for around 40 % of Europe’s energy consumption, and 36 % of carbon emissions. In France, it accounts for 44 % of energy consumption and nearly 25 % of CO2 emissions.

The Observatoire de l’Immobilier Durable (Green Building Observatory) has produced a diagram detailing the specific aspects covered by this taxonomy. It highlights the importance of energy efficiency, the use of sustainable and recyclable materials, water and waste management, and biodiversity.

What are the implications for property professionals?

To ensure that your buildings meet the criteria of the European taxonomy, you can apply for HQE Bâtiment Durable (Sustainable Building) certification. There are three types of certification, depending on your needs as a property developer: building construction, renovation, and acquisition and management.

HQE Bâtiment Durable certification offers the best proof that a building is in line with the European taxonomy. It certifies energy efficiency, responsible resources management, indoor air quality, building adaptability and many other criteria that contribute to environmentally-friendly construction. What’s more, it improves your ESG (Environmental, Social and Governance) and SRI (Socially Responsible Investment) ratings and gives you access to the best financing conditions.

Does this green taxonomy favour new buildings at the expense of older buildings in need of renovation? That’s the view of Louis Moullas, Managing Director of the Observatoire de l’Immobilier Durable. In an interview with Le Moniteur magazine, he said “it will be much simpler for any property manager to buy a building constructed after 2020 that complies with the European RE2020 regulations in order to be considered green in terms of acquisition and ownership. That’s how the European taxonomy gives new buildings a very strong competitive edge.”

This view needs to be qualified. Nicolas Biais, Associate Director of Primpromo, analyses that: “while the simplest way of complying with the European Taxonomy is to focus on new buildings constructed after 2020, the current property situation is not conducive to the construction of new housing, either in France or in the rest of the European Union.” In France, reservations for new housing fell by 15 % in 2022, according to the latest report from the Ministry of Ecological Transition. The housing division of the Fédération Française du Bâtiment (French Building Federation) estimates that this represents a fall of 70,000 new homes in one year.  Nicolas Biais concludes that: “the trend is therefore towards a “new housing crisis”, illustrated by a fall in building permits last year and a slowdown in new housing starts.”

Under these conditions, the advantage given to new buildings to comply with the European taxonomy may be difficult to exploit in the years to come. This leaves the renovation of old buildings, particularly those that are “leaking heat”, which account for 7.2 million buildings in France according to the Observatoire national de la rénovation énergétique (National Observatory of Energy Renovation – ONRE).

Renovation of older buildings is the priority over the next few years. This situation is therefore likely to limit the number of companies that will be able to comply with HQE Bâtiment Durable certification. For how long?