The European Commission and China have completed the initial phase of a project to create a common taxonomy for sustainable finance.
According to Regulation Asia, the project was initiated back in July last year, following which the International Platform for Sustainable Finance created a working group to compare China’s catalogue of green bond-supported projects and the EU’s sustainable finance classification scheme.
From this working group, a common ground taxonomy was compiled. This taxonomy details a list of economic activities that are recognised as having substantial contributions to mitigating climate change.
The taxonomy stretches over six major categories including manufacturing, energy, construction, transportation, forestry and solid waste. The categories, the partners claim, can be used to improve the comparability and future interoperability of taxonomies around the world.
The People’s Bank of China (PBOC) stated that having a common taxonomy will help promote China-EU green investment and financing cooperation and cross-border activities, whilst also cutting the cost of green certification for cross border transactions.
The PBOC added that market entities can use the common taxonomy to issue and trade green financial products in the international market on a voluntary basis.
Furthermore, the working group intends to further expand the taxonomy’s coverage to involve more sustainable economic activities, while also promoting greater comparability, compatibility and consistency of global sustainable finance classification standards.
Earlier this year, a report by a panel set up by Japan’s Financial Services Agency provided recommendations on how to promote sustainable finance in the country.
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