The European Commission yesterday published a report setting out work carried out to identify commonalities and differences between the EU’s and China’s systems for determining whether certain economic activities are environmentally sustainable.
The focus was on climate change mitigation, without considering whether “significant harm” was caused to other environmental objectives by the activities in question.
The “common ground taxonomy” covers 61 activities (over 80 were analysed) across six sectors, including agriculture, forestry and fishing; manufacturing; and electricity, gas, steam and air conditioning supply.
For each activity, the extent and/or nature of the overlap is described using one of six “scenario” designations, for example signalling “clear overlap” or that the EU or Chinese criteria are more stringent and/or detailed.
According to a report about the overlap taxonomy, it could be used to “improve the comparability and future interoperability of taxonomies around the world”.
The common ground taxonomy does not entail any legal implications in either the EU or China, and is not formally endorsed by other members of the International Platform on Sustainable Finance (IPSF).
Launched in 2019 to enable joint action, the IPSF now has 18 member jurisdictions, representing over 55% of global greenhouse gas emissions. At least seven of them are actively looking to develop national or regional taxonomies, according to the IPSF.
China’s taxonomy is mainly used by financial institutions and corporations for the issuance of green bonds in the Chinese onshore markets.
Produced by an EC-China co-chaired working group, the report on the “common ground taxonomy” was one of three that the IPSF produced at its annual meeting, held yesterday to coincide with the UN climate change summit in Glasgow. The comparative taxonomy work was announced at its annual meeting last year.
Also published yesterday was a report on the sustainability-related disclosure policy landscape across IPSF jurisdictions, as well as Brazil and the US, although the US has not formally joined the group.
The IPSF yesterday also produced a statement reaffirming IPSF members’ commitment to cooperate in the development of “globally comparable and interoperable sustainability approaches and tools to identify, verify and align investments with sustainability goals, including definitions and taxonomies, taking due account of local specificities and transition considerations”.
The IPSF’s meeting and output yesterday comes as EU member states have been struggling to come to an agreement on how to define natural gas and nuclear power in the context of the taxonomy regulation.
Separately, the IPSF is seeking feedback on the common ground taxonomy, which it describes as an evolving document. The deadline to participate in the consultation is 4 January 2022.