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A taxonomy of sustainable finance taxonomies

Author

Listed:
  • Torsten Ehlers
  • Diwen (Nicole) Gao
  • Frank Packer

Abstract

Sustainable finance taxonomies can play an important role in scaling up sustainable finance and, in turn, in supporting the achievement of high-level goals such as the Paris Accord and the UN sustainable development goals. This paper develops a framework to classify and compare existing taxonomies. Several weaknesses emerge from this classification and comparison, including the lack of usage of relevant and measurable sustainability performance indicators, a lack of granularity and lack of verification of achieved sustainability benefits. On this basis, the paper proposes key principles for the design of effective taxonomies. The principles are then employed to develop a simple framework for transition taxonomies. The key policy messages of the analysis are: (i) Endeavor that taxonomies correspond to specific sustainability objectives; (ii) Encourage the development of transition taxonomies and focus alignment with the objectives of the Paris Agreement; (iii) Monitor and supervise the evolution of certification and verification processes; and (iv) Shift to mandatory impact reporting for green bonds.

Suggested Citation

  • Torsten Ehlers & Diwen (Nicole) Gao & Frank Packer, 2021. "A taxonomy of sustainable finance taxonomies," BIS Papers, Bank for International Settlements, number 118.
  • Handle: RePEc:bis:bisbps:118
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    Cited by:

    1. Van Roosebeke, Bert & Defina, Ryan, 2023. "ESG and Deposit Insurance: Taking Stock and Looking Ahead," MPRA Paper 116239, University Library of Munich, Germany.
    2. Bermúdez Morata, Lluís & Blay Berrueta, Daniel & Guillén Estany, Montserrat, 2008. "Análisis de la aparición de discapacidades en personas mayores de Cataluña = Analysis of disability onset of the elderly in Catalonia," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 5(1), pages 3-16, June.
    3. Chris Kenyon & Mourad Berrahoui & Andrea Macrina, 2021. "Sustainability Manifesto for Financial Products: Carbon Equivalence Principle," Papers 2112.04181, arXiv.org.
    4. Chris Kenyon & Mourad Berrahoui & Andrea Macrina, 2022. "Transparency principle for carbon emissions drives sustainable finance," Papers 2202.07689, arXiv.org.

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