Taxonomies emerging around the globe

The development of taxonomies as a common language to classify economic acitivities and assess how sustainable they are."The EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. It could play an important role helping the EU scale up sustainable investment and implement the European green deal. The EU taxonomy would provide companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable. In this way, it should create security for investors, protect private investors from greenwashing, help companies to become more climate-friendly, mitigate market fragmentation and help shift investments where they are most needed." (as described by the EU Commission).China and the EU are expected to publish the "Common Taxonomy" by year-end, as reported by Asian media last week. PBOC (People's Bank of China) deputy governor Chen Yulu had reportedly said that the first set of common classification standards for sustainable finance, based on both Chinese and European standards, will be released by year-end. A common taxonomy would benefit market participants in both jurisdictions and avoid the cost of double certifications. The issuance of cross-border investment products will also be more feasible.Although the common taxonomy of EU and China will be the most important globally, a number of other countries and jurisdictions are working on taxonomy projects as described by FoSDA - Future of Sustainable Data Alliance. Some of the most important taxonomy developments are the following:Japan: Green Bond Guidelines in 2017 (updated 2020), Basic Guidelines on Transition Finance (2021), Roadmap Taskforce to formulate sector-specific roadmapsMalaysia: principles-based taxonomy with a focus on climate mitigation and adaptionMongolia: taxonomy modified on the Chinese Green Bond Endorsed Project CatalogueRussia: taxonomy developed by the state development bank (VEB), drawing on both the EU and Chinese taxonomiesSouth Africa: draft taxonomy drawing on the EU taxonomySouth Korea: draft taxonomy closely aligned to the EU Taxonomy in objectives and structureASEAN: set up an ASEAN Taxonomy Board to develop an ASEAN Taxonomy, expected to be announced in November 2021Bangladesh: taxonomy mirroring the contents of the EUR Taxonomy.Canada: expert group of the Canadian Standards Association, developing a "transitions" focused taxonomy, a new Sustainable Finance Action Council will develop a taxonomyChile: roadmap for taxonomy developed publised in 2021Colombia: follows the EU TaxonomyDominican Republic: developing a taxonomyIndia: taxonomy, initially with a focus on climate change mitigation and adaptationIndonesia: national task force to formulate a taxonomy, two categories: "green" and "towards green"Kazakhstan: taxonomy being developed and possibly to be published in late 2021New Zealand: taxonomy developed based on the EU taxonomyPhilippines: green inter-agency taskforce with securities and exchange commission and the central bankSingapore: consultation paper, reference to EU taxonomyThailand: taxonomy addressing local needs while also aligning international developmentsUnited Kingcom: City of London's Green Finance Institute, taxonomy broadly in line with the EU TaxonomyVietnam: taxonomy expected to be aligned with the EU TaxonomyMexico: discussing a Mexican taxonomySri Lanka: taxonomy modelled on the Chinese and EU taxonomiesMultinational companies and investors in these companies will have to consider all taxonomies where they operate. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics. All opinions expressed are those of the author or contributing source.