Much has been said in 2023 about the European Green Taxonomy, the classification of economic activities that are, in the eyes of the European Union, considered environmentally sustainable. European companies have already begun to report their activities based on this classification, and the more closely aligned their businesses are with the classification, the more likely they are to reduce their financing costs and be included in sustainable investment portfolios. For investors, the rating lets them know which assets in their funds are truly green. Visit the specialized portal elEconomista ESG.
Europe is one step ahead when it comes to regulating sustainable finance, but its ranking is by no means the only one. There are currently about 35 taxonomy projects in the world, This number has increased significantly over the past year and a half. Seven of these regulations have already entered into forceAs is the case in European Union, which continues to expand (currently includes about 200 activities, and 35 more will be added soon). But those China, Mexico, Colombia, Russia, South Korea, Indonesia and Malaysia.
Added to this is a significant number 22 other regulations are under developmentIn addition to the three being promoted by the private sector in Brazil, New Zealand and Mongolia; Hence the importance of interoperability between them. As noted in Spain Annual Report 2023, recently published, “The fact that a large number of these classifications take the EU classification as a reference facilitates the integration of sustainability data into financial markets.” You might be interested in: The new thematic boxes that come with the taxonomy.
In just over a year, The number of ongoing taxonomic projects has increased from 25 to about 35 This is due, in large part, to developments that have taken place in Latin America and the Caribbean. “Evidence of this is the proliferation of green classifications in the region, with the aim of providing clear, science-based definitions, helping to avoid greenwashing and facilitating the identification of assets, activities or projects compatible with low-carbon economic development.” In Spainsif study. Experts of this platform explain that the classifications of Colombia and Mexico, as well as those within the region, share similar objectives to those of the European classification: climate change mitigation and adaptation, as well as other water-related matters. Management, biodiversity protection or circular economy, facilitating interoperability. CNMV: Energy and “brick” are the sectors most closely aligned with the classification.
the Sustainable taxonomy for Mexicowhich was first published in March 2023, is innovative in including the goals of gender equality and access to basic services, issues that the European Case has not yet addressed (it is purely environmental, and does not touch on social issues). For its part, Brazil It has one of the few global rankings that has been developed privately. It was created by the Brazilian Federation of Banks in 2021, following the example of the European Union and with the aim of providing financial institutions with a tool to assess climate-related risks.
Another country has made rapid progress in regulating green finance, placing itself among the leading countries China. Its green classification, already in place, does not follow the same scheme as the European classification, but both superpowers laid the foundations in 2021 to harmonize their definitions as much as possible. After analyzing the points of correspondence between both lists, they arrived at a common floor classification.
Why are there so many categories?
The reason why there are so many different regulations for the same issue lies in the composition of the activities of each area, which is completely different. According to Andrea González, Director General of Spainsif, “The European Classification of Activities is based on NACE, a statistical classification of economic activities in the European Union. In the case of Canada, for example, it responds to natural resourcesWhich constitutes the backbone of its economy, in contrast to what happens with the European economy, which depends more on services.” Which agents lead the development of the framework. In ASEAN, these associations are generally sectoral, while in other cases the impetus comes from private sector entities, and in Europe from regulatory bodies.