Partners in the Taxonomy Roadmap Initiative share the Principles for Taxonomy Interoperability

As COP30 gets underway in Brazil, partners in the Taxonomy Roadmap Initiative* have shared a new global resource to help UN member states and regulators design and implement sustainable finance taxonomies. The new Principles for Taxonomy Interoperability provide guidance to policymakers to help them ensure that taxonomies—which are key policy tools for mobilizing sustainable finance—are usable, credible and comparable across borders.

Sustainable finance taxonomies are powerful policy instruments for both emerging and developed markets, enabling the financial sector, policymakers, regulators and other stakeholders to share common understandings of which economic activities are contributing to environmental and social goals. This, in turn, can help build investors’ confidence, which helps mobilize and monitor capital towards projects with positive environmental and social impacts.

However, with more than 50 national and regional taxonomies around the world, banks and investors face challenges in determining how to evaluate, compare and effectively use these taxonomies in their decision-making. While a local taxonomy is an essential building block for market growth, to enable the cross-border flow of capital, taxonomies need to be “interoperable”—able to be compared based on common principles and/or a scientific baseline. Interoperability also goes hand in hand with credibility and usability, which are central to the value of taxonomies and their ability to shift capital flows in the direction needed, so it is important to focus on all of these elements simultaneously.

The Principles for Taxonomy Interoperability, launched by partners in the Taxonomy Roadmap Initiative at a Pre-COP event in São Paulo, provide guidance to aid sustainable finance taxonomy developers and policymakers in creating, governing and implementing taxonomies, with the aim of supporting financial and non-financial companies in effectively using these taxonomies in their decision-making about environmentally and socially sustainable projects to finance and advance.

Greater implementation of interoperable taxonomies worldwide has the potential to accelerate mobilization of the trillions of dollars in climate finance needed globally to decarbonize, build capacity for climate resilience and adaptation, and meet Paris Agreement targets.  Achieving interoperability requires global collaboration with input from emerging and developed market contexts. It is a collective pursuit of a global objective in line with the COP30 Presidency’s call for collaboration as well as leadership from the Global South.

As part of COP30, Brazil’s Ministry of Finance has proposed the “Super Taxonomy Initiative”, which aims to raise the ambition for interoperability through a renewed effort to agree on and utilize the Principles for Taxonomy Interoperability proposed by the Taxonomy Roadmap. The Principles provide a bridge between the strategic vision of the COP29 Roadmap and the practical actions needed to advance this shared agenda.  

“Taxonomies are an important component of the sustainable finance architecture,” said Eric Usher, Head of UNEP FI, which is a partner in the Taxonomy Roadmap Initiative. “The Taxonomy Roadmap Initiative’s development of the Principles for Taxonomy Interoperability has resulted in a set of useful guidelines that can help member states and regions develop and implement their taxonomies to be interoperable with other jurisdictions. Greater interoperability can attract more climate finance, for example, as financial and non-financial companies across different regions can more easily use harmonized taxonomies to inform their decision-making.”

 

Previewing the Principles

The seven principles, discussed further within the new guide, are:

1. Build the foundation of the taxonomy on jurisdictional environmental, economic and social priorities and on existing principles of best practices such as the G20 Principles.¹
2. Apply common taxonomy design features and terminology such as sector classification, shared objectives, screening criteria, minimum safeguards and transition approaches.
3. Define use cases and users in the development and review process, prioritizing straightforward use cases with the highest market demand internationally and domestically. This may include a pathway for small- and medium-sized enterprise (SME) adoption in line with national priorities.
4. Ensure that regular reviews and expansion of taxonomy coverage take account of activities more common in taxonomies as well as activities with high impact within national contexts.
5. Seek to reduce complexity of the taxonomy by providing clear science-based criteria and implementing the taxonomy in a way that interoperates with national and international frameworks.
6. Send a clear market signal and foster market ownership through early user support, stakeholder engagement, pilots, peer-to-peer learning, capacity building and the sequencing of taxonomy implementation in consultation with users.
7. Join international collaborative efforts by engaging taxonomy developers through platforms and fora, conducting comparison studies, leveraging international proxies to close criteria gaps and exploring the legal and operational feasibility of cross-border recognition.

Each principle is intended to enhance interoperability in a unique way and is valuable independently, and not necessarily contingent on all principles being adopted.

The publication is available in English and Portuguese, with summaries translated into Spanish, Mandarin, and French to support wider accessibility across regions.

 

Ongoing efforts to support global taxonomy development

The Taxonomy Roadmap Initiative will continue advancing practical tools to support greater transparency, alignment, and global dialogue in taxonomy development and has four knowledge products coming out at COP30:

• Principles for Taxonomy Interoperability,
• Global Status and Taxonomy Roadmap Implementation Report: Advancing Sustainable Finance Taxonomies & Interoperability,
• Sustainable Finance Taxonomy Mapper: a global public-good tool that enables users to compare, navigate, and analyze sustainable finance taxonomies across jurisdictions, and
• Website for the Taxonomy Roadmap Initiative to promote coordination, transparency, and global alignment by sharing roadmap updates, facilitating partner engagement and fostering collaboration among key stakeholders.

 

About the Taxonomy Roadmap Initiative

*The Taxonomy Roadmap Initiative is known in full as the Roadmap for Advancing Interoperability and Comparability of Sustainable Finance Taxonomies. It was launched at COP29 in response to the global need for interoperability. It is a voluntary initiative with global partners aiming to collectively make technical progress on taxonomies and interoperability. Partners in the initiative are SBFN, IFC, CB of Azerbaijan, International Platform on Sustainable Finance, UNDP, Climate Bonds Initiative, UNEP FI, UN PRI, GIZ (technical support), Ministry of Finance Brazil, and EU Sustainable Finance Advisory Hub.

 

[1] G20 Sustainable Finance Working Group, 2022. G20 Sustainable Finance Roadmap. https://g20sfwg.org/roadmap/