Taxonomies, Standardization, and Disclosure

The use of national, regional, or even international taxonomies can drive private finance, especially when coupled with standardization and transparent expectations for the private sector.

2030 Goals

Third-party open data initiatives, initiatives that standardize and streamline disclosures, and a gradual move from voluntary to mandatory disclosure of emissions and transition planning would significantly improve data availability.
Develop clear definition and criteria of transition activities and finance to be included in the green taxonomies.
Interoperability of taxonomies are essential to mobilize capital as conflicting taxonomies hinder decisions to allocate capital to EMDEs

Status
No progress

A variety of frameworks have been developed to track the net zero response of private financial institutions, with an increasing emphasis on Transition Plan Frameworks, as key tools to move from commitments and target setting towards, action. Main frameworks include:
- Assessing low-Carbon Transition (ACT) for Finance Investors framework (2023)
- CDP Climate Change Questionnaire (2023)
- Glasgow Financial Alliance for Net Zero (GFANZ) Transition Plan Framework (2023)
- United Nations High Level Expert Group (UN HLEG) Recommendations on the Net Zero Emissions Commitments of Non-State Entities (2022)
- International Sustainability Standards Board (ISSB) International Financial Reporting Standards (IFRS)S1 and S2 (2023). - Net-Zero Asset Owner Alliance (NZAOA) Target-setting Protocol fourth edition (2024)- Institutional Investors Group on Climate Change (IIGCC) Net Zero Investment Framework (NZIF) 2.0(2024)
- Principles for Responsible Investment (PRI)'s Climate risk: An investor resource guide (2022) and "Stewardship for Sustainability Evaluation Tool".
- SBTi's near term framework for financial institutions-
- Transition Plan Taskforce (TPT) Disclosure Framework and Asset Owner Sector Guidance (2023)-
- UNEP FI Guidelines for Climate Target Setting for Banks V2 and supporting note (2024a, 2024b)a good overview is provided here: https://www.climatepolicyinitiative.org/wp-content/uploads/2024/10/NZFT-2024_Methodology.pdf-
- ASEAN Transition Finance Guidance V.2 (2024), the first regional guidance that providing additional guidance and clarity on different types and applications of Transition Finance to help unify the terminology and therefore understanding among market participants and providing guidance on reference pathways for real economy companies to use to set their transition plans and financial institutions to use when assessing entities’ transition plans.
National taxonomies have become a popular method to mobilize climate finance, but not all have the same level of ambition.
Standardization and harmonization remain ongoing issues. There are conflicts between taxonomies with different categorizations. Conflicts and lack of interoperability hinder decisions to allocate capital to EMDEs.
Standardization and harmonization remain ongoing issues. There are conflicts between taxonomies with different categorizations. Conflicts and lack of interoperability hinder decisions to allocate capital to EMDEs.
Despite a collective agreement on the need for a standardized corporate climate disclosure approach, the implementation of the ISSB recommendations is lagging. A total of six jurisdictions have adopted the standards on a voluntary or mandatory basis, with 16 other jurisdictions planning to adopt them in the future.
Some regional taxonomies are making progress. For example, despite the voluntary application of the ASEAN taxonomy, progress is happening; Indonesia and Singapore-Asia taxonomies are now principally aligned with ASEAN taxonomy.

Relevant Actors & Audiences

Private FIs

JP Morgan Chase, Bank of America, Citigroup, Goldman Sachs, Allianz, Axa, Blackrock, Vanguard, State Street, Glasgow Financial Alliance for Net Zero (GFANZ)

Public FIs

NDBs, Green Climate Fund, Global Environment Facility, Adaptation Fund, Climate Investment Funds

Multilateral Development Banks

African Development Bank (AfDB), Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), Council of Europe Development Bank, European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter-American Development Bank (IDB), Islamic Development Bank, New Development Bank (NDB - BRICS Bank), World Bank

Governments

European Union, Colombia, China, Mexico

Leading Countries and Alliances

United Arab Emirates, Kenya, Italy

International Organizations

OECD

Supportive Stakeholders

Sustainable Finance Institute Asia (SFIA), ASEAN Capital Market Forum (ACMF)