The Taxonomy Regulation establishes common and science-based definitions to determine whether an economic activity is environmentally sustainable. It aims to make sustainable finance more accessible to investors, while also protecting them from false or misleading claims about a financial product’s sustainability. In doing so it shifts a large part of the burden to prevent greenwashing onto the legislator. This chapter therefore critically analyses the Taxonomy’s ability to protect investors from greenwashing and identifies a number of pitfalls. The market for sustainable financial products is rapidly growing, yet the Taxonomy so far only covers environmental sustainability in selected sectors. Gathering and disclosing the necessary environmental data can be challenging and costly and may discourage companies and financial market participants to offer Taxonomy-aligned products, possibly turning it into a niche product. The Taxonomy’s binary approach makes it difficult for investors to assess the sustainability of complex financial products and limits incentives for non-aligned companies to improve their performance. This chapter therefore argues for an extension of the Taxonomy that distinguishes between positive, intermediary and harmful activities and provides definitions for social and governance aspects of sustainability