Should a Sustainable Finance Nomenclature be Enforced?

The mandatory disclosure of information under sustainable finance taxonomies is becoming more relevant to measure taxonomy alignment Related:

• Blog 1: Sustainable Finance Taxonomy

• Policy Brief: “Towards a Common Pathway Across Sustainable Finance Taxonomies"

• Blog 2: Sustainable Finance Taxonomy: A Key Financial Regulatory Tool in the Reform of the Financial System

Key Takeaways:

1. Disclosure of information and verification is necessary for the compliance and provision of data to financial regulators to assess the level of alignment with the taxonomy and prevent greenwashing practices.

2. The EU is the only jurisdiction with in-place governance for mandatory disclosure of information; however, there are signs that a new wave of jurisdictions will likely move from voluntary to mandatory disclosure.

3. A series of conditions are needed for developing countries to enforce a sustainable finance nomenclature, such as internal capacities at the political and technical levels, same as raising awareness and accompanying entities subject to disclosure.

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The momentum towards taxonomy development continues in 2023 as the latest implementation trends among countries have started to show signs of lessons learned and best practices with the recent publications of taxonomies in the first quarter of this year (Thailand, Mexico, and ASEAN 2.0), as well as Canada’s Taxonomy Roadmap Report and Australia’s Taxonomy Recommendations Report.