ICMA publishes overview of ‘taxonomies’ for sustainable finance and recommends success criteria

 

18 May 2021 There have been both market and official sector initiatives to develop ‘taxonomies’ (classification systems) in an effort to provide clear guidance on which activities, assets and/or projects qualify for sustainable finance, and more widely in some cases as sustainable for regulatory or prudential purposes. Progress on the development of the EU Taxonomy in particular has accelerated the discussion about taxonomies all over the world.

ICMA’s new publication Overview and recommendations for sustainable finance taxonomies compares the main features and methodologies of official taxonomies from the EU, China and other national authorities as well as influential market-based systems including the Green Bond Principles’ project categories.

Nicholas Pfaff, ICMA’s Head of Sustainable Finance said: ‘We hope that this paper will help market participants and service providers better understand and use existing taxonomies, and will provide especially the official sector with proposed success criteria to benchmark current and future taxonomy initiatives. We emphasise that taxonomies should be designed to work together with complementary approaches in the market and need to be transition-enabled’.

The key success criteria proposed by the paper recommend that taxonomies should be:
  1. Targeted in their purpose and objectives.
  2. Additional in relation to existing international frameworks.
  3. Usable by the market for all intended purposes.
  4. Open and compatible with complementary approaches and initiatives.
  5. Transition-enabled incorporating trajectories and pathways.

More information on ICMA’s sustainability work.
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