Dive Brief:
- The United Nations Environment Programme Finance Initiative, Principles for Responsible Investment — a UN-backed investor network — and the Climate Bonds Initiative are teaming up to enhance and streamline sustainable finance taxonomies across the world, the groups announced Thursday.
- The partnership aims to reach a consensus on sustainable finance taxonomy definitions and concepts used by policy makers, standard setters and taxonomy users, as well as boost interoperability of such taxonomies and offer implementation tools.
- The climate-focused trio said they would also support the “ongoing development of taxonomies that cover emissions reduction, climate resilience and other environmental objectives.”
Dive Insight:
Sustainable finance taxonomies — or classification systems that outline economic activities that align with environmental, social or/and governance objectives — can cover a broad range of goals, from climate mitigation to gender equality, according to the Organisation for Economic Co-operation and Development. Over the years, several global jurisdictions such as the European Union, China, and Japan have established frameworks to support sustainable investments and better define related taxonomies.
Precision and consistency in such definitions help facilitate sustainable investment as they provide investors with confidence and assurance, according to the OECD. Additional benefits can also include improved market clarity and simplified tracking of sustainable finance flows, which eases the process of measuring them or introducing policy actions such as incentive-setting, the OECD said.
According to Liesel van Ast, deputy head of UNEP FI, more than 40 global jurisdictions are developing or implementing sustainable finance taxonomies.
“Sustainable finance taxonomies play an important role in promoting and providing a common language for sustainable finance,” van Ast said in a press release. “Users and developers can benefit from support to enhance usability, interoperability, and cross border capital flows.”
Sean Kidney, CEO of the Climate Bonds Initiative, echoed this statement, noting that sustainable finance taxonomies provide “simple guidance for investors, banks and corporates, making [it] easier for capital to flow to climate solutions.”
