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OECD starts project to map worldwide sustainable taxonomies

Addressing concerns that the lack of a common language could hamper investment in sustainable assets

The Organisation for Economic Co-operation and Development is starting a project mapping sustainable taxonomies in a number of jurisdictions globally.

The research will cover the forthcoming EU taxonomy, as well as some other existing sustainable finance taxonomies – analysing their main features, and identifying commonalities, distinctions and possible gaps.

The proposed project will initially cover taxonomies in China, Japan, Canada, the UK, France and the Netherlands, as well as the EU taxonomy.

A paper anticipated by mid-2020, expected to be titled “Emerging taxonomies: stocktake of efforts to develop sustainable finance definitions” will cover not just green taxonomies but sustainability more broadly, looking at social and governance criteria, too, across a range of asset classes.

The Paris-based think tank said the work will help address concerns that the lack of a common language could hamper investment in sustainable assets, particularly across borders.

It also sees the project as potentially informing policymakers and future dialogue, coordination and development around taxonomies.

Mireille Martini, who is heading up the project from within the Green Finance and Investments team at the OECD’s Environment Directorate, said it would focus on sustainable finance definitions that have passed through a legislative approval process, as well as take stock of the lessons learnt from their market implementation.

She said: “Over the years various efforts have emerged to develop sustainable finance taxonomies, but they’re developing fast and over different jurisdictions at once, so we thought it would be worth mapping these taxonomies.”The research will be undertaken as an activity of the OECD Centre on Green Finance and Investment, set up in 2016 to “help catalyse and support the transition to a green, low-emissions and climate-resilient economy”.

It will identify where taxonomies converge in their definitions of sustainability, and where they diverge, for example looking at how “green coal” in included in the Chinese taxonomy but not eligible in other frameworks.

Martini said: “By sustainability we mean not only green and climate issues, but also the ‘S’ for Social and the ‘G’ for Governance. For instance, in the case of the ‘S’ – is it included at all, and if it is, how is it dealt with? Is it looking at the ILO [International Labour Organization] Convention, or OECD guidelines, or both – or something else entirely?”

Martini presented a scoping paper for the project last week to the OECD Working Party on Climate, Investment and Development (WPCID), which gave a green light to the project.

In May 2018 the European Commission published a legislative proposal on establishing a taxonomy for sustainable economic activities, appointing a Technical Expert Group (TEG) to assist in its development. The scope of the taxonomy has been hotly debated, particularly around the green versus brown taxonomies and social issues. The TEG’s final report is expected in June.

Sustainable finance taxonomies can form the basis of labels for sustainable finance products, as seen already in France with the TEEC label and anticipated from the EU as part of its Action Plan on Sustainable Finance .