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Key Takeaways:
Upcoming NDC 3.0: The 2025 release of NDC 3.0 will be a pivotal moment for global climate commitments, highlighting the need to integrate sustainable finance taxonomies into national strategies.
Global taxonomy momentum: Over 52 taxonomies have been observed across the world. To date, 24 jurisdictions are developed, while 24 others remain under development, and 5 are still in the planning stage.
Transparency - the key for signaling the market: Transparent and robust taxonomies are critical for aligning public and private financial flows with climate objectives, facilitating the channeling of investments toward initiatives that effectively contribute to national climate goals.
Harmonizing sustainable finance taxonomies with national climate commitments
Under the Paris Agreement, countries are required to submit their Nationally Determined Contributions (NDCs) every five years, outlining their strategies to reduce greenhouse gas emissions and combat climate change. With the first round of NDCs submitted around 2015 and subsequent updates in 2020, nations are now preparing for the next cycle of submissions, often referred to as NDC 3.0, due in 2025.
As countries prepare for NDC 3.0, which is expected to reflect even greater ambition and refinement, developing a robust policy framework for translating climate strategies into actionable and sustainable investments will be essential.
For this reason, sustainable finance taxonomies, commonly referred to as “green taxonomies,” continue to garner massive global attention, as they lay the groundwork for overcoming these hurdles by providing clear definitions and national standards for sustainable investments, making it easier to attract private capital towards low-carbon solutions, including clean energy, innovative technologies and resilient infrastructure, among many others.
As a result, transparent and credible investment environments are established to help ensure that public and private financial flows are aligned and directed towards projects that truly advance the climate goals and NDC ambitions.
The compounding interest to align public and private capital towards a low-emission future
In 2023, CCAP published the blog, “Shaping the Future of Finance: Exploring the Global Rise of Sustainable Finance Taxonomies.” This blog highlighted the rapid progress in the worldwide development of sustainable finance taxonomies from the publication of the first taxonomy in 2019 to 2023. It featured a color-coded map that provided readers with an overview of the global landscape of taxonomies.
The objective of this dynamic map, which continues to evolve each month, is to illustrate the swift expansion of taxonomies across regions and to showcase their development status. It highlights the emergence of first-mover countries, or pioneers, which have paved the way for taxonomy implementation, followed by second and third movers, who have drawn inspiration from these early efforts. As a result, 54 jurisdictions are now engaged in planning, developing and implementing taxonomies, hence shaping the future of sustainable finance.
As shown in the map above, the vast majority of activities related to taxonomy development have taken place across Asia, Europe and Latin America and the Caribbean (LAC). The map categorized jurisdictions into three groups based on their current status in the development process:
Developed and implemented (indicated in “blue”)
Under development (indicated in “green”)
Plan to develop (indicated in “yellow”)
At a first glance, the map reveals significant progress in Asia and Europe. These two regions encompass over 16 taxonomies, including two regional taxonomies: the European Union (EU) taxonomy and the Association of Southeast Asian Nations (ASEAN) taxonomy. The LAC is also gaining traction, with five taxonomies published—three of them in 2024 by Costa Rica, the Dominican Republic and Panama. Remarkably, the geographical distribution of these taxonomies reveals notable gaps, particularly in the Middle East, Africa and the United States. In the Middle East and Africa, the only developed and implemented taxonomy is the one in South Africa, established in 2022.
The map sets the scene for a more in-depth exploration of regional developments in generating forthcoming taxonomies. The findings are significant as they highlight the political and technical factors influencing the taxonomy landscape and their broader implications. Specifically, these insights reveal how taxonomies are shaping the future of sustainable finance by signaling the market and investors to align public and private capital towards a low-emission future.
Recent milestones in taxonomy development (2023 – 2024)
Western and Central Asia
With the publication of Mongolia’s taxonomy in 2019, Asia became the first continent to have a taxonomy. Since then, the landscape has changed substantially. The Western and Central Asia region features four developed taxonomies. Armenia launched the “Developing Green Taxonomy in Armenia” project as a preliminary step towards constructing its own national taxonomy and is expected to conclude in 2024. All the while, Türkiye is concurrently working on its development process scheduled to be concluded at the end of 2026. In a joint report published by the Green Investment Principles (GIP) and AIFC - Green Finance Center, the development of a Social Taxonomy is underway in Kazakhstan to accommodate its existing green taxonomy and is focused on mobilizing social finance for sustainable projects. Social finance refers to socially beneficial economic activities, such as directing capital flows to activities that support human rights and enable improved living and working conditions. Tajikistan has also expressed interest and is considering developing the necessary policies and framework for a green taxonomy.
East Asia and the Pacific
In East Asia and the Pacific, the advancements in sustainable finance reflect a region increasingly dedicated to taxonomy development: 11 jurisdictions in total and one regional taxonomy (ASEAN) showcasing cutting-edge approaches tailored to regional needs.
Notable developments in 2024 include the Hong Kong Taxonomy (May) and the Philippine Sustainable Finance Taxonomy Guidelines (SFTG) (February). Similar to the ASEAN taxonomy and others in the region, the Hong Kong Taxonomy heavily focuses on transition finance, but it also provides sector-specific criteria to accommodate its dense urban environment. Given Hong Kong’s close economic ties with Mainland China, the taxonomy is designed to be compatible with China's Green Bond Endorsed Project Catalogue to facilitate interoperability. In contrast, the Philippines' SFTG is tailored to reflect the nation’s unique development and focuses on sectors, such as agriculture, disaster resilience and social inclusion, which are vital for the Philippines’ climate adaptation initiatives.
Thailand is quickly advancing its taxonomy implementation. After adopting the initial Taxonomy Phase 1 (June 2023), the Bank of Thailand (BOT) announced the development of Phase 2, which aims to incorporate key sectors, such as manufacturing, agriculture, waste management, construction and real estate. This accelerated progress is supported by its triannual revision process, allowing partial grandfathering; which ensures that financial products (e.g. bonds and loans) can retain their status as green or amber if they continue to meet the pre-existing technical screening criteria (TSC), offering flexibility in a rapidly evolving regulatory environment.
The Singapore-Asia Taxonomy (December 2023) stands as the world’s first multi-sector transition taxonomy, featuring a traffic light system and a “measures-based approach” across eight different focus sectors. Unlike the EU Taxonomy, which defines a technical screening criteria for economic activities to determine the issuance of green bonds, Singapore’s structure for regulating green bonds is tailored to consider regional characteristics and development needs. Notably, it sets out a specific criteria focused on energy efficiency and retrofitting for buildings, targeting the promotion of green building practices. This includes the use of cleaner construction materials, renovation upgrades to optimize energy and cooling systems of existing buildings, as well as the acquisition of buildings that meet high energy efficiency standards.
In the Pacific, five jurisdictions are developing their taxonomies. Fiji’s upcoming taxonomy, led by the Reserve Bank of Fiji (RBF) aims to capitalize on the 2021 Climate Change Act to support the country’s net-zero emissions targets and long-term climate goals. Australia’s taxonomy process is also gaining attention, with the first round of public consultation closed in June 2024 and a second round expected by the end of 2024. Key features include TSC for the decarbonization of the mining sector, covering both operating and planned mines. Additionally, Australia's taxonomy seeks to incorporate human rights considerations, particularly focusing on indigenous communities and cultural heritage within its social safeguards.
Latin America and the Caribbean (LAC)
The LAC region’s landscape has made notable advancements in 2024. Following the green taxonomy in Colombia (2022) and the sustainable taxonomy in Mexico (2023), other LAC nations have joined the taxonomy movement.
Panama’s Sustainable Finance Taxonomy represents a significant milestone, not only in advancing sustainable finance within the market but also through integrating its implementation into the country’s NDC 3.0 (June 2024). While becoming the first country in the world to present an NDC 3.0, Panama has also further streamlined its alignment of public and private capital flows consistent with Article 2.1c of the Paris Agreement.
Like other taxonomies under development in the region, Costa Rica’s taxonomy uses the guiding principles outlined in the Common Framework of Sustainable Finance Taxonomies for LAC (July 2023). In particular, the taxonomy gives special attention to the adaptation objective by showcasing a trio of cases for developing criteria for climate adaptation (specific criteria, list of specific activities/measures or general criteria).
Brazil, Chile and Peru have also each reached recent notable development milestones with their respective taxonomies. Brazil, for instance, introduced an Action Plan for the “Sustainable Taxonomy of Brazil” for public consultation in late 2023, with the first version of its taxonomy set for mandatory adoption in January 2026. In Chile, Revisory Groups are currently evaluating the eligibility of economic activities and moving forward with the creation of TSC for nine sectors, including the mining and quarrying – making Chile the first country in the LAC region to incorporate this sector. Meanwhile in Peru, the sectorial committees for six economic sectors are finalizing their own TSC.
Middle East and Africa
To date, the United Arab Emirates (UAE) stands as the only jurisdiction in the Middle East that has embarked on developing a sustainable finance taxonomy. From April to June 2024, Kenya's Draft Green Taxonomy was open for public consultation. With this step, Kenya joins Rwanda, Senegal and Tunisia as the only African countries developing taxonomies. As seen in the LAC and the Pacific, more Small Island Developing States (SIDS) are getting into the mix, as Mauritius has just recently signaled its interest in developing a national taxonomy.
Recognizing innovative taxonomy initiatives
Beyond the scope of traditional sustainable finance taxonomies published by jurisdictions, a few specialized taxonomy frameworks have also emerged, capturing activities and investments on unique development topics. The United Nations Office for Disaster Risk Reduction (UNDRR) and Climate Bonds Initiative (CBI) launched the “Designing a climate resilience classification framework” (June 2023), and the Just Transition Taxonomy, published by the World Bank (June 2024), represents another innovative approach to sustainable finance.
While traditional taxonomies often focus on environmental objectives, these new and innovative frameworks define economic activities that not only drive the transition to net-zero emissions but do so in a way that is socially responsible. The Just Transition Taxonomy, for example, identifies 57 activities that facilitate coal phasedown to reach net-zero targets in a way that ensures a Just Transition for people and communities and for repurposing land and assets. Meanwhile, the climate resilience classification framework seeks to establish a scope that covers adapted investments that consider material physical climate risks at the asset, activity and entity levels.
Conclusion
As CCAP closely monitors the developing landscape of taxonomies, the upcoming release of NDCs 3.0 in 2025 is set to be pivotal for global commitments in the forthcoming climate finance discussions. The UNFCCC has emphasized the significance of these documents as the most crucial climate texts of our lifetime.
To fully leverage NDCs 3.0 and ensure climate goals are met, it is essential for countries to fully integrate sustainable finance taxonomies into national strategies. This integration will not only scale up capital but also enhance transparency, aligning both public and private financial flows with the Paris Agreement's objectives.
The momentum behind the growing global commitment to implementing taxonomies reflects a fierce devotion from policymakers, financial regulators, superintendencies, financial entities and international organizations to create transparent and effective pathways towards a sustainable future.
CCAP’s work in sustainable finance taxonomies
We invite you to follow CCAP’s ongoing analysis and updates on the development and impact of sustainable finance taxonomies.
In 2022, CCAP and GIZ published the policy brief, Towards a Common Pathway Across Sustainable Finance Taxonomies, which takes an in-depth look at taxonomies and provides a high-level overview of their relevance, key process principles and practical development steps. Additionally, CCAP performed advisory work on a Climate Finance Tracking Taxonomy for the energy sector in Seychelles and launched the LAC Observatory of Taxonomies in 2023. We are also supporting ImplementaSur and the Ministry of Finance in Chile on the development and implementation of a sustainable finance taxonomy in Chile. In Paraguay, we are helping the Ministry generate and disseminate a strategic communications plan to key stakeholders to raise awareness about their taxonomy cultivation.
Over the past two years, CCAP has been actively distributing research and information about taxonomies and their trends through its blog series on the topic. Click here to learn more about our Climate Finance Program!
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CCAP’s mission is to support every step of climate action, from ambition to implementation. A recognized world leader in climate policy and action, CCAP creates innovative, replicable climate solutions, strengthens capacities, and promotes best practices across the local, national, and international levels to accelerate the transition to a net-zero, climate resilient future. CCAP was founded in 1985 and is based in Washington, DC.
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