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International Platform on Sustainable Finance

Common Ground Taxonomy – Climate

Change Mitigation

Instruction report

IPSF Taxonomy Working Group

Co-chaired by the EU and China

3 June 2022

Disclaimer

The present report represents a technical work based on comparison between the

EU and China taxonomies within the scope of the instruction report with no legal

effect and is not formally endorsed by IPSF member jurisdictions. The result does not

create either a ‘common’ or ‘single’ standard that is mandatory for IPSF member

jurisdictions

Acknowledgements

This report was produced by the IPSF Taxonomy Working Group, co-chaired by Mr Marcel Haag for

the European Commission and Dr Ma Jun for the People’s Bank of China. It was written by the

IPSF Technical Expert Group with valuable inputs by IPSF members and observers. The IPSF

Secretariat is particularly grateful for the invaluable contributions of Sean Kidney, Bridget Boulle,

and Wenhong Xie (Climate Bonds Initiative), Bolu Wang (Tsinghua National Institute of Financial

Research), Xiaofeng Li (China Institute of Building Standard Design and Research), Wenqin Lu

(China Energy Conservation and Environmental Protection Group), and Sibo Song (Lianhe

Equator).

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InternationalPlatformonSustainableFinanceCommonGroundTaxonomy–ClimateChangeMitigationInstructionreportIPSFTaxonomyWorkingGroupCo-chairedbytheEUandChina3June2022DisclaimerThepresentreportrepresentsatechnicalworkbasedoncomparisonbetweentheEUandChinataxonomieswithinthescopeoftheinstructionreportwithnolegaleffectandisnotformallyendorsedbyIPSFmemberjurisdictions.Theresultdoesnotcreateeithera‘common’or‘single’standardthatismandatoryforIPSFmemberjurisdictions3AcknowledgementsThisreportwasproducedbytheIPSFTaxonomyWorkingGroup,co-chairedbyMrMarcelHaagfortheEuropeanCommissionandDrMaJunforthePeople’sBankofChina.ItwaswrittenbytheIPSFTechnicalExpertGroupwithvaluableinputsbyIPSFmembersandobservers.TheIPSFSecretariatisparticularlygratefulfortheinvaluablecontributionsofSeanKidney,BridgetBoulle,andWenhongXie(ClimateBondsInitiative),BoluWang(TsinghuaNationalInstituteofFinancialResearch),XiaofengLi(ChinaInstituteofBuildingStandardDesignandResearch),WenqinLu(ChinaEnergyConservationandEnvironmentalProtectionGroup),andSiboSong(LianheEquator)..4Contents1.Executivesummary.............................................................................................62.Introduction..........................................................................................................92.1.BackgroundandObjectives.........................................................................................92.1.1.BriefintroductionofIPSF’sTaxonomyWork............................................................................92.1.2.TheCommonGroundTaxonomy(CGT):purpose,objectivesandusers............................92.1.3.ContributionoftheCGTtoglobalcomparabilityandinteroperabilityofsustainablefinancestandards.......................................................................................................................................112.2.OverarchingcomparisonoftheEUandChinataxonomies...................................122.2.1.Historyofdevelopmentprocess...............................................................................................122.2.2.Objectives...................................................................................................................................142.2.3.Scope...........................................................................................................................................152.2.4.Approachestodefiningalignment/eligibility..........................................................................172.2.5.Legalframework.........................................................................................................................192.2.6.Classificationframework............................................................................................................203.CommonGroundTaxonomyMethodology...................................................243.1.Scopeofanalysis.........................................................................................................243.1.1.Objectivesandscreeningcriteria.............................................................................................243.1.2.Prioritysectors............................................................................................................................253.2.Sectionmapping..........................................................................................................263.2.1.MappingagainstISICasaneutralcode.................................................................................263.2.2.Challengesandsolutionsfound:codesmappedagainstmultipleactivities,activitieswithoutacodeetc......................................................................................................................................263.3.Scenarioanalysismethodology.................................................................................273.3.1.Descriptionofapproach:whatisascenarioanalysismethodologyandwhywasitused?.......................................................................................................................................................273.3.2.Scenariodescription...................................................................................................................273.4.StructureofCGTClimate............................................................................................284.OverviewoftheCommonGroundTaxonomy...............................................304.1.Overviewofalignmentacrosssectors......................................................................304.2.DoNoSignificantHarm...............................................................................................304.3.MinimumSafeguard.....................................................................................................304.4.Climatechangeadaptation-relatedactivities...........................................................315.Usability..............................................................................................................325.1.Challengesandpotentialsolutionstoensuringusabilityforanalysis.................326.Futureconsiderations......................................................................................336.1.PathwaytoincludeareasnotcurrentlyincludedinCGT........................................336.2.Optionstoincorporateotherjurisdictions...............................................................3356.3.ReflectionofTaxonomyprinciplesoutlinedbytheIPSF-UNDESAinputpapertotheG20SustainableFinanceWorkingGroup.................................................................3461.ExecutivesummaryInJuly2020,undertheIPSF,theEUandChinainitiatedaWorkingGroupontaxonomieswiththeobjectivestoundertakeacomprehensiveassessmentoftheexistingtaxonomiesforenvironmentallysustainableinvestments,includingidentifyingthecommonalitiesanddifferencesintheirrespectiveapproachesandoutcomes.InNovember2021,theIPSFTaxonomyWorkingGrouppublishedthefirstversionoftheCommonGroundTaxonomy(CGT)report,andissuedacallforfeedbacktosolicitcomments.ThispublicationisthesecondversionoftheCGTreport,whichnowincludes72climatemitigationactivitiesthatarerecognizedbyboththeEUSustainableFinanceTaxonomyandChina’sGreedBondEndorsedProjectCatalogue.TheCGTisamilestoneworkresultingfromanin-depthcomparisonexercisethatputsforwardareasofcommonalityanddifferencesbetweentheEUandChina’sgreentaxonomies.Thisupdatedpublicationcoverstheinitialphaseofworkwhichwillbeexpandedovertime.Thescopecoverssubstantialcontributioncriteriaforclimatechangemitigation,whilstotherenvironmentalobjectivesareyetnotcoveredatthisstage.Consideringthedifferenceoftheenvironmentallegislationsystembydifferentjurisdictions,othereligibilityfeaturessuchasDoNoSignificantHarmwerenotcoveredwithinscopeofthefirstphase.TheCommonGroundTaxonomyis…TheCommonGroundTaxonomyisnot…✓AnanalysisonapproachesoftheEUtaxonomyandChinataxonomy,andthemethodologyforcomparingandidentifyingcommonalitiesanddifferencesbetweensomefeaturesofthetwotaxonomies-AlegaldocumentationbytheEUandChinawhichentailsrequirement/obligationforeitherjurisdictiontochangetheirtaxonomy.✓Anevolvingtoolthatmayhelpdifferentactorstounderstandthetypesofactivitiesthatcouldbecoveredundertherespectivetaxonomieswithinthescopeofthecomparisonexercise-Asingletaxonomyorexclusivedefinitionofenvironmentallysustainableeconomicactivitiescoveringallenvironmentalobjectives,suchasbiodiversity,pollutionprevention,etc.✓Atechnicaldocumentforvoluntaryreferencebyinterestedpartieswithinthelimitsofthescopeofthecomparisonexercise-CoveringalleligibilityfeaturesorallactivitiesintheEUandChinataxonomiesasexplainedintheinstructionreport.✓Ananalyticaltoolorreferenceforotherjurisdictionstoconsiderwhendevelopingtheirowntaxonomies-Aproposalforinternationalstandardsorlegaldocumentthatimposesanyglobalstandardonotherjurisdictions.TheCGTcanbeusedtoimprovethecomparabilityandfutureinteroperabilityoftaxonomiesaroundtheworld.Hence,itintendstoprovidemoreclarityandtransparencyaboutthecommonalitiesanddifferencesbetweenapproachesandeventuallylowerthetrans-boundarycostofgreeninvestmentsandscaleupthemobilizationofgreencapitalinternationally.Italsoprovidesasolidmethodologyonthebasisofwhichothertaxonomiescanbecomparedinthefuture.ThemethodologyunderpinningtheCGTisakeypartofthevalueofthiswork.Thefirststageinvolved(1)extractclimatechangemitigationactivitiesfromtheChinaTaxonomy,(2)mappingofallactivitiesinbothtaxonomiestoaneutralcodesothattheycouldbemoreeasilycompared.The7InternationalStandardIndustrialClassificationofAllEconomicActivities(ISIC)wasusedastheinternationalreferenceclassification.(3)selectionofprioritysectorswhichwouldsignificantlycontributetocarbonemissionreductionorsequestration.Thesecondstageinvolvedevaluatingthedetaileddescriptionandtechnicalscreeningcriteriaforeachlinetoascribeeachlinewithascenariobasedontheiroverlapasfollows:•Scenario1:Areaswithclearoverlapscoversactivitieswhichhaveoverlapsandcanbeconsideredcomparablewithinthescope/forthepurposeoftheCGTreport.•Scenario2:EUcriteriaaremorestringentand/ordetailedwasassignedtoactivitieswheretheEUscreeningcriteriawereeithernarrowerinscopeormorestringentand/ordetailedthanChinesecriteria.Inthiscase,theEUcriteriaweredescribedintheCGTingreaterdetail.•Scenario3:Chinacriteriaaremorestringentand/ordetailedwasassignedtoactivitieswheretheChinacriteriawereeithernarrowerinscopeormorestringentand/ordetailedthanEUcriteria.Inthiscase,theChinacriteriaweredescribedintheCGTingreaterdetail.•Scenario4:Identifiableoverlapwasassignedtoactivitiesthathavesomealignmentinscopeofactivities,andcouldbedefinedbyutilisingbothsetsofeligibilitycriteria.•Scenario5/6:Unclearoverlaporobviousdifferentiation:Scenario5wasassignedtoactivitiesthatwereverydifficulttomapintheothertaxonomy.Scenario6wasassignedtoactivitieswheretherewasobviousdifferentiation.TheCommonGroundTaxonomyanalysed79activitiesacrosssixsectorsintheInternationalStandardIndustrialClassificationofAllEconomicActivities(ISIC),Rev.4:•Agriculture,forestryandfishing•Manufacturing•Electricity,gas,steamandairconditioningsupply•Watersupply;sewage,wastemanagementandremediationactivities•Construction•TransportationandStorageThesearedetailedinthedocumentasfollowed:CGTnumberandactivitynameEachactivityintheCGTisnumberedaccordingtoitsheadlinesectore.g.A1.1isAfforestationwhichisthefirstactivityundertheAgricultureandForestrysector.Nameofactivity–ChinaorEUnomenclatureisuseddependingonthescenario(e.g.forScenario2activities,generallyEUnomenclatureisused)DescriptionDescriptionofwhatiscoveredundertheactivity-ChinaorEUnomenclatureisuseddependingonthescenario(e.g.forScenario2activities,generallyEUnomenclatureisused)SubstantialcontributioncriteriaScopeofactivityDescriptionofTechnicalscreeningcriteriaAdditionalnotesProvidesreferencenumberswithintheassociatedactivitiesintheEUand/orChinaTaxonomy.OverlapscenarioProvidethescenarioascribedduringtheresearchFutureconsiderations8ThisfirstphaseoftheCGTpresentsadetailedanalysisoftheEUandChinaTaxonomies.Otherareasmissingcouldbeincorporatedintofuturework.Futureworkcouldinclude:•AdditionalsectorssuchaslikeservicesandICT;•AdditionalenvironmentalobjectivesastheyareagreedwithintheEUprocess;•TransitionconsiderationsastheEUandChinataxonomiesandtaxonomiesfromotherjurisdictionsevolvetoincludemoretransitionconsiderations;•Newareasofalignmentinexistingactivitieswheremappingalignmentwaschallenging,thereispotentialtodomoreresearchworktounderstandpossiblecommonalities;•OthereligibilityfeaturessuchasDNSHandminimumsafeguardscouldbebroughtintostrengthenthecomparisonandinteroperabilitybetweenjurisdictions;and•Otherjurisdictionswillbebroughtinastheirtaxonomiesarefinalised.AnimportantpartoffutureworkisthatitdovetailswiththeworkoftheG20SustainableFinanceWorkingGroup(SFWG).AttherequestofG20SFWG,theIPSFandtheUnitedNationsDepartmentofEconomicandSocialAffairs(UNDESA)issuedaninputpaperwhichprovidesamappingandanalysisofexistingtaxonomiesandthoseunderdevelopment.1Thispapersetsoutthesevenhighlevelprinciplesforjurisdictionsandmarketsforthedevelopmentofcoherentapproachestoidentifyandaligninvestmentswithsustainabilitygoals.TheseprinciplesandtheG20SustainableFinanceRoadmapwillhelpguidetheworkoftheIPSFandtheCGTgoingforward.TheIPSFTaxonomyWorkingGroupwilllooktoincludemorejurisdictionsinitscomparativeanalysis,andexploreoptionstofurtherenhancetheinteroperabilityofsustainablefinancetaxonomiesaroundtheworld.1Improvingcompatibilityofapproachestoidentify,verifyandaligninvestmentstosustainabilitygoals(IPSF-UNDESAinputpaperfortheG20SFWG)https://g20sfwg.org/wp-content/uploads/2021/09/G20-SFWG-DESA-and-IPSF-input-paper.pdf92.Introduction2.1.BackgroundandObjectives2.1.1.BriefintroductionofIPSF’sTaxonomyWorkTheInternationalPlatformonSustainableFinance(IPSF)isamultilateralforumthataimstoenableexchangeofpracticesandincreaseinternationalcooperationonsustainablefinancerelatedmatters.Thisinturncontributestoscalingupthemobilisationofprivatecapitaltowardsenvironmentallysustainableinvestments.Partofthisworkfocussesondeepeningcooperationonthedevelopmentof“sustainabletaxonomies”aroundtheworldandtohelptomitigatefragmentationofglobalgreen/sustainabilitydefinitionsasfaraspossible.Overtwentyjurisdictionsaroundtheworldhavedevelopedorareintheprocessofdevelopingnationalorregionalsustainabletaxonomies(seeAnnex)2.Ofthesejurisdictions,ChinaandtheEUadoptedtheirrespectivetaxonomiesintolegislativeframeworks.InJuly2020,theEUandChinahaveinitiatedaWorkingGroupontaxonomies(hereafterreferredtoasthe“WG”)co-chairedbybothjurisdictionsandopentoallIPSFmembersandobservers.TheWG’sobjectivesaretoundertakeacomprehensiveassessmentoftheexistingtaxonomiesforenvironmentallysustainableactivities,includingidentifyingthecommonalitiesanddifferencesintheirrespectiveapproachesandoutcomes.ThisworkhasbecomeknownastheIPSF“CommonGroundTaxonomy”.2.1.2.TheCommonGroundTaxonomy(CGT):purpose,objectivesandusersWhatistheCommonGroundTaxonomy?TheCommonGroundTaxonomy(CGT)isareportresultingfromanin-depthcomparisonexercisethatputsforwardareasofcommonalitybetweentheEUandChina’staxonomies.ThefirstversionofthisCGTreportwaspublishedinNovember2021.ThispublicationisthesecondversionoftheCGTreport,whichincorporatesfeedbackreceivedfromthegeneralpublicbetweenNovember2021andJanuary2022,andincludesadditional“confirmed“activitiesthatwereconsideredas“pendingactivities”thatarenotcoveredinthefirstversion.ThecurrentversionoftheCGTcovers72climatemitigationactivitiesthatarerecognizedbyboththeEUandChinataxonomies.ThecurrentversionoftheCGTcoversonlyareasthatareinthecurrentscopeofbothtaxonomies,intermsofobjectives,eligibilitycriteria,activitiesandthresholds.Ifthereareactivities,objectivesoreligibilitycriteriacoveredbytheEUbutnotChina(andviceversa),theyarenotpartoftheCGT.Todetermineeligibilitycriteriaforeachactivity,itputsforwardthecriteriathatarecompliantinbothjurisdictions–usuallythismeansreferringtothejurisdictionwithnarrowerscopeormorestringent/moredetailedcriteriaalthoughinsomecases,criteriaarethesame(andthereforedirectlyeligible)orinothersbothsetsofcriteriashouldbeused.TheCGTdoesnotentailanylegalimplicationsineitherjurisdiction.ItonlycoversclimatechangemitigationobjectiveoftheEUtaxonomyandactivitiesconsideredmakingsubstantialcontributiontothesaidobjective.Thus,thedetailedactivitiesreferencedintheCGTtableaccompanyingthisreportshouldnotbeconsideredasautomaticallyalignedwiththeEUtaxonomy,ascertaineligibilitycriteriaoftheEUtaxonomy,suchastheDoNoSignificantHarm(DNSH)criteriaandtheminimum2Ibid.10socialsafeguards,arenotconsideredbythisreport.TheCGTdoesnotyetcovertheclimatechangeadaptationobjectiveoftheexistingEUClimateDelegateAct.TheEUtaxonomywilladoptcriteriafortheremainingfourenvironmentalobjectivesin2022andcontinuetobedevelopedthereafter.However,thereportisakeymilestonewhichprovidesthefirstcomprehensiveactivity-by-activitymappingandcomparisonoftheEUandChinataxonomies,includingrelevanttechnicalscreeningcriteria.Itcreatesanimportantmethodology,asdetailedinChapter3,forimprovingthecomparabilityandinteroperabilityoftaxonomiesacrossjurisdictions,inlinewiththeG20SustainableFinanceRoadmap.PurposeoftheCGTworkTheCGTcanbeusedtoimprovethecomparabilityandinteroperabilityoftaxonomiesaroundtheworld.Hence,intendstoprovidemoreclarityandtransparencyaboutthecommonalitiesanddifferencesbetweenapproachesandpotentiallycontributetotheanalysistolowerthetrans-boundarycostofsustainableinvestmentsandscaleupthemobilizationofsustainablecapitalinternationally.Italsoprovidesasolidmethodologyonthebasisofwhichothertaxonomiescanbecomparedinthefuture.Itcomesatacriticalmomentwhentaxonomiesarebeingdevelopedbyagrowingnumberofcountriesandregionsaroundtheworldandthedebateindifferentinternationalforaisbecomingmoreandmoreimportantinordertoavoidunnecessaryfragmentationandconfusioninthemarket.Tothisend,itdoesnotnecessarilymeanthattaxonomieshavetobeidenticalbutratherthattheyaredevelopedbasedoncommonsustainabilityobjectivesandprinciplesandusingacommonlanguagemakingthemmorecomparableandinteroperable.Thiscomesacrossclearlyinthehigh-levelprinciplesputforwardbytheIPSFUNDESAinputpapertotheG20.3Forinstance,theaforementionedinputpaperpointsoutthecommonfeaturesidentifiedinexistingtaxonomiessuchas:(1)Granularandclear,(2)Publiclyavailable,and(3)Science-based.Bettercomparabilityandinteroperabilityarecoreenablersofinternationalfinanceglobally–iftaxonomiesarecomparableandinteroperable,theycanhelptoreducetransactioncostsbyavoidingunnecessaryduplicationofverifications,byincreasingmarketconfidence,reducemarketsegmentation,andhelptofacilitatecrossbordergreencapitalflows.ByhighlightingmajorareasofcommonalitybetweentheEUandChinataxonomies,theCGTrepresentsacrucialstepintheprocessofexploringoptionsforincreasinginteroperabilitybetweentaxonomiesoftheEUandChina,anditcouldalsobeusedasastartingpointorreferenceforotherjurisdictionsindevelopingtheirowntaxonomieswithcommonfeaturesasdescribedabove.TheCGTaimistoultimatelyhelpfacilitategreaterglobalinteroperabilityandtheflowofgreenfinance.Potentialbenefits.ThefindingsofthiscomparisonexercisearelimitedonlytosomefeaturesoftheEUandChinataxonomiesandhavenolegalvalue.Onthisassumption,theymayinformavarietyofactors,including:3Ibid.11•Issuersofgreenbondsandothergreenfinanceproducts,andgreenbonds/assetsverifiers;•Entitiestryingtoassessthealignmentoftheirbusinesswithlowcarboneconomyobjectives;•Banksandfinancialinstitutionsinaligningtheiractivitieswithlowcarboneconomyobjectives;•Researchandacademicinstitutions;•DevelopmentfinanceinstitutionsandreportingentitiesinterestedinmarketcomparisonswiththeCommonPrinciplesforClimateMitigationFinanceTracking(2015updatedin2021)4andinternationaldefinitionsofClimateFinance;•Jurisdictionssuchasnationalgovernmentsorregionalbodieslookingforanalyseordeveloptheirowntaxonomy;•InternationalstandardsettingbodiesconsideringtheCGTasareferenceforworkingonothersustainablefinancestandards.2.1.3.ContributionoftheCGTtoglobalcomparabilityandinteroperabilityofsustainablefinancestandardsAgreentaxonomyisanimportantbuildingblockofasustainablefinancialsystem.Itisatooltohelptodirectflowsofcapitaltogreen,sustainableprojects.However,enablingtheflowofcapitalintogreen,sustainableprojectsaroundtheworldrequiresinteroperabilityoftaxonomies.Ifinteroperable,taxonomiescanhelpinvestors’directcapitalacrossbordersmoreeasily,forinstancebyreducingthecostsofverifications/duediligence.Further,giventhattaxonomiescansupportothertoolssuchasbenchmarksandlabels,theinteroperabilityoftaxonomiesisconducivetocreatingbetterconsistencyacrosstherangeoftoolsinthemarket.TheCGTisexpectedtoplayapivotalroleinincreasingcomparabilityofsustainablefinancetaxonomiesanddefinitionsofgreen,sustainableactivitiesglobally,withaviewtofutureinteroperabilityinlinewiththeG20SFWGindications.ThisisaroleitwillplaybothwithintheIPSFmembershipandbeyond.Inparticular,theG20SFWGislookingintowaystoimproveglobalcomparabilityandinteroperabilityofapproachestoaligninvestmentstosustainabilitygoalsincludingtaxonomies.TherecentlyreleasedpaperbyIPSFandUNDESAhaveinformedtheG20SFWGworkandseekstopromotecommonprinciplestoimproveconsistencyinsustainableinvestmentapproaches5.Aspartofthiswork,theG20SFWGhasmadeanumberofrecommendationstofacilitatetheinteroperabilityacrossapproachesandtoolsforidentifying,verifyingandaligninginvestmentswithsustainabilitygoals,includingthe:“Differentmarketscanusereferenceorcommontaxonomiesonavoluntarybasis.Suchusecanfacilitatecross-bordersustainablefinancialflowsforexamplebyreducingthecostsofverifications.Forjurisdictionsormarketsthatwanttouseataxonomy,butdonothavetheresourcestodeveloptheirowntaxonomies,theycanalsochoosetoadoptanexistingtaxonomy.Regionswithalargenumberofrelativelysmalleconomiesormarkets(e.g.,Africa,CentralAsia,andLatinAmerica)canconsiderregionalcollaborationontaxonomies,includingdevelopmentoftaxonomies,toavoidmarketsegmentationandilliquiditywhilepromotingcross-borderinvestment.”64MDB/IDFC,CommonPrinciples,2021(https://www.eib.org/attachments/documents/mdb_idfc_mitigation_common_principles_en.pdf)5Improvingcompatibilityofapproachestoidentify,verifyandaligninvestmentstosustainabilitygoals(IPSF-UNDESAinputpaperfortheG20SFWG)(https://g20sfwg.org/wp-content/uploads/2021/09/G20-SFWG-DESA-and-IPSF-input-paper.pdf)62021G20SynthesisReportofSustainableFinanceWorkingGroup,(https://g20sfwg.org/wp-content/uploads/2021/11/Synth_G20_Final.pdf)12IPSFhasplayedakeyroleasknowledgepartnerofthealignmenttopicintheG20SFWGthroughtheinputpaperwithUNDESA.ThedevelopmentoftheCGTisanotherdemonstrationprojectforthiseffort.2.2.OverarchingcomparisonoftheEUandChinataxonomies2.2.1.HistoryofdevelopmentprocessTheEuropeanUnionInDecember2016,theEuropeanCommissionestablishedtheHigh-LevelExpertGrouponSustainableFinance(HLEG)tohelpdevelopanoverarchingandcomprehensiveEUroadmaponsustainablefinance.TheHLEGprocessculminatedinthepublicationofthereportFinancingaSustainableEuropeanEconomyinJanuary20187which,amongothers,recommended‘establishinganEUsustainabilitytaxonomy’asapriorityaction.InMarch2018,theEuropeanCommissionadoptedtheActionPlanonFinancingSustainableGrowth8,outliningacomprehensiveEU-levelstrategytomobiliseprivatecapitaltowardssustainableinvestment,enhancetransparencyandmanagerisksofclimatechangeandenvironmentaldegradation.BasedontendetailedactionsintheActionPlan,theEuropeanCommissionproposedinMay2018,amongotherlegislativeinitiatives,tocreateanEUTaxonomyofgreen,sustainableactivities(hereafterreferredtoastheEUTaxonomy).ThisledtotheestablishmentoftheEUTechnicalExpertGroup(EUTEG)consistingof35membersandobserversfromcivilsociety,academia,businessandthefinancesector,todevelopinteraliaalistofeconomicactivitiesandenvironmentalperformancerequirementsfortheEUTaxonomytohelptoachievetheEU’sclimategoalsandSDGs.7FinalReport2018bytheHigh-LevelExpertGrouponSustainableFinance,(https://ec.europa.eu/info/sites/info/files/180131-sustainable-finance-final-report_en.pdf)8Seefactsheet:https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/200108-financing-sustainable-growth-factsheet_en.pdf13InrespectoftheEUTaxonomyproposal,theTEGmissionwastoadvisetheCommissiononthescreeningcriteriaoneconomicactivitiestoidentifywhethertheymakeasubstantialcontributiontoclimatechangemitigationandclimatechangeadaptation.InMarch2020,theEUTEGofficiallyreleasedseveralreports,9whichincludedtheFinalReportonTaxonomy10anditsTechnicalAnnex11.On18June2020,theEUco-legislators(theEuropeanParliamentandtheCouncil)adoptedthelegislativeframeworkfordevelopingtheEUTaxonomy(EUTaxonomyRegulation)whichwaspublishedintheOfficialJournaloftheEuropeanUnion,enteringintoforceon12July2020.TheadvicefromtheEUTEGinformedtheCommissionClimateDelegatedAct(level2legislation),adoptedon4June2021,definingthetechnicalscreeningcriteriaforsomeprioritisedeconomicactivitiestomeetthetaxonomyeligibilityrequirementsforclimatechangemitigationandclimatechangeadaptationobjectives.InOctober2020,theEUPlatformonSustainableFinance(the“Platform”),wasestablishedtocontinuetheworkoftheEUTEGwhosemandateendedinSeptember202012.Amongothertasks13,inthecomingmonths,thePlatformwilladvisetheCommissiononthetechnicalscreeningcriteriaontheenvironmentalobjectivesbeyondclimate,andinformthedevelopmentofthedelegateactsfortheseremainingobjectives.TheEUTaxonomyisdeemedtobeoneofthebiggeststridesinhelpingthefinancialsystemreorientcapitaltowardsalow-carbonclimateresilienteconomy,inlinewiththeParisAgreement(seefurtherdetailsinthesection3.1.1).ChinaChina’sgovernmentreshuffledthecountry’sfinancialregulatorystructurein2018,whichthenconsistedofonecentralbank(thePeople'sBankofChina-PBOC)andthreecommittees(theChinaBankingRegulatoryCommission-CBRC;theChinaInsuranceRegulatoryCommission-CIRC;andtheChinaSecuritiesRegulatoryCommission–CSRC),overseeingcommercialbanks,insurancecompanies,andcapitalmarketparticipants,respectively.CBRCandCIRCmergedtoformtheChinaBankingandInsuranceRegulatoryCommission(CBIRC),relinquishingsomerule-makingandmacro-prudentialpowerstothePBOCcentralbankrelativetoitspredecessorsCBRCandCIRC.AnotherreasonfortheestablishmentoftheCBIRCwastobettercoordinatetheregulatoryactivityofboththeCBRCandCIRC,asbanksinChinabecomemorediversifiedintheirbusinessoperations.Meanwhile,China’sNationalDevelopmentandReformCommission(NDRC)holdsaroletotakechargeintheoverallmanagementofinvestment,workwithotheragenciestodecide9Technicalexpertgrouponsustainablefinancewebsite(https://ec.europa.eu/info/publications/sustainable-finance-technical-expert-group_en).InitsAnnexIII,theHLEG-ReportincludeddraftMitigationCriteriaproposedbytheEuropeanInvestmentBank(EIB),integratedandagreedbytheHLEG.EIB’sproposalreflectedtheconclusionsofa“WhitePaperontheNeedforaCommonLanguageinGreenFinance”co-authoredbytheChinaGreenFinanceCommitteeandtheEIB.ThedocumentmappedtheChinaGreenBondEndorsedProjectCatalogueof2015,usingtheGreenBondPrinciplesoftheInternationalCapitalMarketsAssociation(objectives)andtheMDB-IDFCCommonPrinciplesforClimateMitigationFinanceTracking(categories)as“Rosettastone”.10Taxonomy:FinalreportoftheTechnicalExpertGrouponSustainableFinance,March2020(https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/200309-sustainable-finance-teg-final-report-taxonomy_en.pdf)11Updatedmethodology&UpdatedTechnicalScreeningCriteria,March2020(https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/200309-sustainable-finance-teg-final-report-taxonomy-annexes_en.pdf)12SecondextensionofthemandateoftheTechnicalexpertgrouponsustainablefinance(TEG)(https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/191219-sustainable-finance-teg-extension_en.pdf)13FrequentlyaskedquestionsCommissionPlatformonSustainableFinance(https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/201001-sustainable-finance-platform-faq_en.pdf)14thegovernment’smandateinapprovinginvestmentprojects,andformulatethecatalogueforgovernment-approvedfixedinvestmentprojects,andpromotetheimplementationofsustainabledevelopmentstrategies.Therefore,the“green”reformofChina’sfinancialsystemisco-supervisedbythesegovernmentministriesfromdifferentperspectiveandcoordinatedatdifferentpaces.In2012,theCBIRCbegantouseagreencreditstatisticalformtocollectdataofloansrelatedtoenvironmentalprotectionandcirculareconomicactivitiestomonitortheenvironmentalandsocialrisksofbankloans.In2015,toscaleupandpopulategreenfinanceproducts,thePBOCpublishedthefirstversionofGreenBondEndorsedProjectsCatalogue(2015)alongwithitsgreenfinancialbondissuancemanagementregulation.In2019,theNDRCpublishedtheGreenIndustryGuidingCatalogue(2019),whichaimstoclarifythescopeofgreenindustrialactionsthroughouttheentireeconomy.Basedontheindustrycataloguetogetherwithitsassociatedtechnicalcriteriainstructiondocument,therelevantagenciesareabletoformulatepoliciesregardinginvestment,pricing,budgetsandtaxationtofacilitatethedevelopmentofgreenindustries.In2020,thePBOCbuiltitsowngreenstatisticsystembasedontheNDRCcataloguetocollectdataongreenloansfrom24majorChinesebanks.TheCBIRC’sgreencreditstatisticalformhasbeenupdatedrecently,whichdiffersslightlyfromtheindustrycatalogue.On21April2021,inanefforttocoordinategreendefinitionsamongthefinancialregulators,thePBOC,togetherwithNDRCandCSRC,jointlyreleasedtheamendedversionoftheGreenBondEndorsedProjectsCatalogue(2021Edition)14.ThisrepresentsanothermajordevelopmentinChina’sefforttounifyitsdomesticgreendefinitions.Theconsolidationofthemultiplepre-existinggreenbondcataloguesmeansthatgoingforward,theidentificationofthe“green”attributesofallbondswillbebasedonthecriteriaoftheupdatedanddomesticallyharmonizedcatalogue,regardlessoftheirtypeorthemarketinwhichtheyareissued.TheGreenBondEndorsedProjectCatalogue(2021Edition)representsthemostup-to-date,unifiedandcleargreendefinitionsattheactivityandprojectlevelinChina.WeusetheGreenBondEndorsedProjectsCatalogue(2021Edition)(hereafterreferredtoastheChinaTaxonomyforbrevity)asChina’sequivalenttotheEUTaxonomyforthepurposesofcomparisoninthisreport.2.2.2.ObjectivesTheEUTaxonomyhassixenvironmentalobjectivesstatedbelowofwhichtheEuropeanCommissionhastodateadoptedtechnicalscreeningcriteriaforsubstantialcontributiontothefirsttwoonclimatechangemitigationandadaptation.Technicalscreeningcriteriaforthefourremainingenvironmentalobjectivesarecurrentlyunderdevelopmentforsomeprioritisedactivitiesandwillbepublishedin2022.Articles10–15oftheEUTaxonomyRegulationdefinetheconceptofsubstantialcontributionasitrelatestoeachoftheenvironmentalobjectives.Thesearebroadlysummarisedasfollows:1.Climatechangemitigation:anactivitythatcontributessubstantiallytothestabilisationofGHGsatalevelwhichpreventsdangerousanthropogenicinterferencewiththeclimatesystemconsistentwiththelong-termtemperaturegoalofinlinewiththeParisAgreementthrougheithertheavoidance,reductionofGHGortheincreaseofGHGremovals.14GreenBondEndorsedProjectsCatalogue(2021Edition)(http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4342400/2021091617180089879.pdf)152.Climatechangeadaptation:solutionsthatsubstantiallyreducetheriskofadverseimpactofthecurrent/futureclimateonaneconomicactivity,orsubstantiallyreducethatadverseimpactwithoutincreasingadverserisksandimpactsforpeople,natureorassets.3.Sustainableuseandprotectionofwaterandmarineresources:anactivitythatcontributessubstantiallytoachievingthegoodenvironmentalstatusofsurfacewater,groundwaterormarinewatersorpreventingthedeteriorationofbodiesofwater(surface,ground,marine)thatalreadyhavegoodstatus.4.Transitiontoacirculareconomy:anactivityusesresourcesinamoreefficientway,increasesdurabilityandlife/useofproducts,increasesrecyclabilityandtheuseofsecondaryrawmaterials,reducessubstantiallyhazardouscontentandminimiseswastedisposal.5.Pollutionpreventionandcontrol:anactivitythatissubstantiallypreventing/reducingpollutantstoair/water/land,orimprovingair/water/soilquality,orcleaning-uppollutants.6.Protectionandrestorationofbiodiversityandecosystems:anactivitythatcontributessubstantiallytoprotecting,conservingorrestoringbiodiversityortoachievingthegoodconditionofecosystems,ortoprotectingecosystemsthatarealreadyingoodcondition.China’sgreentaxonomyreferstofinancialservicesprovidedforeconomicactivitiesthataresupportiveofenvironmentimprovement,climatechangeresponseandmoreefficientresourceutilization.Theseeconomicactivitiesincludethefinancing,operationsandriskmanagementforprojectsinareassuchasenvironmentalprotection,energysavings,cleanenergy,greentransportation,andgreenbuildings.Therefore,theenvironmentalobjectivesofChina’sgreentaxonomyincludeenvironmentalimprovement,climatechangeresponseandmoreefficientresourceutilization.WhiletheenvironmentalgoalsoftheEUandChinaTaxonomiescanbebroadlymappedagainsteachotheratahighlevelinthefigurebelow,theremaybedifferencesatamoregranularlevel.EUObjectives15ChinaObjectives16ClimatechangemitigationClimatechangeresponseClimatechangeadaptationThesustainableuseandprotectionofwaterandmarineresourcesEnvironmentalimprovement(pollutioncontrolandecologicalconservation)TheprotectionandrestorationofbiodiversityandecosystemsThetransitiontoacirculareconomyMoreefficientresourceutilization(circulareconomy,wasterecyclingandpollutionprevention)Pollutionpreventionandcontrol2.2.3.ScopeTheEUandChinesetaxonomiesapplytodifferentcategoriesofusers.TheEUTaxonomyisalistofactivitieswhichcanbeusedbyanytypeofentity.TherearehoweverlegallyrequiredapplicationsoftheEUTaxonomyasfollows17:15EUTaxonomyRegulation16GuidelinesforEstablishingtheGreenFinancialSystem(2016),Article117Regulation(EU)2020/852,Article1161.EUMemberStatesandtheEuropeanUnionwhentheysetoutanypublicmeasures,standardsandlabels;2.FinancialMarketparticipants18thatmakeavailablesustainablefinancialproducts;and3.Largecompanies19(over500employees)undertheNon-financialReportingDirective(NFRD).Thisincludes:oNon-Financialundertakings,reportingKPIsontheirTurnover,Capex&Opexrelatedtotaxonomy-alignedactivities;andoFinancialundertakings(largebanks,assetmanagers,investmentfirmsandinsurance/reinsuranceundertakings),disclosingtheirKPIs(specifiedinanadditionalregulatoryact)stemmingfromtaxonomy-alignedactivitiesLinktolabel/standardsCurrently,theEUTaxonomyanditsdisclosurerequirementsarenotmandatoryforallgreenbondissuers.However,theEuropeanCommission,inJuly2021,putforthalegislativeproposalforavoluntaryEUGreenBondStandardunderwhichissuerswouldberequiredtoallocate100%ofthefunds(proceeds)raisedbytheirbondtoeconomicactivitiesthatmeettheEUTaxonomyrequirements.TheChinaTaxonomyismandatoryforallgreenbondissuersincludingallfinancialinstitutions,corporationsandstate-ownedenterprises,third-partyappraisalagencies,andregulatoryagencies.20Thepurposeistoclearlydefineprojectseligibleforgreenbonds,lowerthepossibilityofgreenwashing(non-greenprojectfinancingthroughgreenbonds),improvethecredibilityandpromotethereputationofgreenbonds,furtherregulatethedomesticgreenbondmarket,anddirectfundstowardsgreenenterprises,assetsandprojects.IssuersmustusetheChinaTaxonomytoensurethatagreenbondtargetprojecthasstrongenvironmentalbenefits.DisclosureobligationsIntheEU,Taxonomydisclosurerequirementsapplytotwodifferenttypesofactors:financialmarketparticipantsandlargecompanies(includingfinancialandnon-financialundertakings).Inaccordancewitharticles5to7oftheEUTaxonomyRegulation,asofmid-2022forclimateobjectives,allfinancialmarketparticipants,whentheymarketaproductas“environmentallysustainable”or“promotingenvironmentalcharacteristics”,mustdisclose:1)theinformationonthetaxonomyenvironmentalobjective(s)towhichtheinvestmentunderlyingthefinancialproductcontributes;and2)adescriptionofhowandtowhatextenttheunderlyinginvestmentsareineconomicactivitiesthatqualifyasenvironmentallysustainableundertheEUtaxonomy.18Financialmarketparticipantsinclude:banks,insurancecompaniesthatprovideInsuranceBasedInvestmentProduct(IBIP),alternativeinvestmentfundmanagers,investmentmanagementcompaniesthatprovideportfoliomanagement,organizationsthatprovideoccupationalretirementorpensionproducts,privateequityandventurecapitalfundmanagementcompanies,qualifiedsocialenterprisefundmanagementcompanies,UndertakingforCollectiveInvestmentinTransferableSecurities(UCITS),indexfunds19Largecompaniesaredefinedasthosewithover500employeeswhoarealreadyrequiredtoprovideanon-financialstatementundertheEUNon-FinancialReportingDirective(NFRD).20InlinewiththePBOCAnnouncement[2015]No.39andtheGuidingOpinionsoftheChinaSecuritiesRegulatoryCommissiononSupportingtheDevelopmentofGreenBonds17Iftheproductisnotmarketedasoneoftheabovecategories,thefinancialmarketparticipantshouldindicatethat‘theinvestmentsunderlyingthisfinancialproductdonottakeintoaccounttheEUcriteriaforenvironmentallysustainableeconomicactivities.’Followingarticle8oftheEUTaxonomyRegulationlargenon-financialundertakingsunderthescopeoftheNon-FinancialReportingDirectivemustdisclose,progressivelyasof2022forclimateobjectives:1)Proportionofgreen,sustainableactivitiesinturnover,and2)Proportionofgreen,sustainableactivitiesincapitalexpenditureoroperatingcosts.Financialinstitutionsandcompaniesmustcompletethedisclosureofinformationontheotherfourenvironmentalobjectivesasofthestartof2023.TheChinaTaxonomyismainlyusedbyfinancialinstitutionsandcorporationsfortheissuanceofgreenbondsintheChineseonshoremarkets,andthedisclosurerequirementsfordifferenttypesofgreenbondsarelistedinthetablebelow:DemonstrationofcomplianceinChina’sGreenBondsMarket21GreenFinancialBondGreenEnterpriseBondGreenCorporateBondGreenDebtFinancingInstrumentSupervisorPBOCNDRCCSRCNAFMIIDocumentthatdeterminestheeligibilityofgreenprojectsChinaTaxonomy(2021)ManagementofProceedsDedicatedaccountUnspecifiedDedicatedaccountDedicatedaccountProjectEvaluationandAssessmentThird-partyverificationencouragedAssessmentandApprovalbyNDRCThird-partyverificationencouragedThird-partyverificationencouragedInformationDisclosureQuarterlydisclosureandannualreportingonuseofproceeds(toPBOC)UnspecifiedAnnualdisclosureAnnualdisclosure;publiclyreportchangestouseofproceeds2.2.4.Approachestodefiningalignment/eligibilityUndertheEUTaxonomy,anactivityis“taxonomy-eligible”ifithasbeenincludedintoaDelegatedActwithTechnicalScreeningCriteriasetforthatactivity.Itmeanstheactivityis“in-scope”oftheTaxonomy.Taxonomyalignment,tobereportedasGreen,isathree-stepprocess:21WorkcitedincludeCBI,ChinaGreenBondMarket,2018(https://www.climatebonds.net/files/reports/china-sotm_cbi_ccdc_final_en260219.pdf),HaoZhang,RegulatingGreenBondsinthePeople’sRepublicofChina:DefinitionalDivergenceandImplicationsforPolicyMaking,2020,(https://www.adb.org/sites/default/files/publication/562076/adbi-wp1072.pdf),Escalanteandalii,MRVSystemDesign:RecommendationsforChineseGreenBonds,2020(https://climatepolicyinitiative.org/wp-content/uploads/2020/06/MRV-System-Design-Recommendations-for-Green-Bonds-in-China.pdf)181.Theactivitymustmakea‘substantialcontribution’toatleastoneofsixenvironmentalobjectives.Substantialcontributionasitappliestoeachoftheobjectivesisdefinedinarticles10-15oftheregulationandtheTechnicalScreeningCriteriaareclearlyidentifiedintheDelegatedActsthataccompanytheregulation–forthemomentonlyonthefirst2environmentalObjectives,ClimateChangeMitigationandClimateChangeAdaptation;2.Inthesametime,analignedeconomicactivitymustcausenosignificantharmtoanyoftheotherfiveenvironmentalobjectives,aligningwiththeDoNoSignificantHarm(DNSH)TechnicalScreeningcriteriadefinedinthecomplementaryDelegatedAct,forthemomentonlyshowcasingthesecriteriaforactivitiesmakingasubstantialcontributiontothefirst2environmentalobjectives;3.Finally,itmustmeetminimumsafeguards,definedinArticle18oftheEUTaxonomyregulationrequiretoensuretheactivityalignmentwiththeOECDGuidelinesforMultinationalEnterprisesandtheUNGuidingPrinciplesonBusinessandHumanRights,includingtheprinciplesandrightssetoutintheeightfundamentalconventionsidentifiedintheDeclarationoftheInternationalLabourOrganisationonFundamentalPrinciplesandRightsatWorkandtheInternationalBillofHumanRightsSubstantialcontributiontoclimatechangemitigationasdefinedinArticle10is“wherethatactivitycontributessubstantiallytothestabilisationofgreenhousegasconcentrationsintheatmosphereatalevelwhichpreventsdangerousanthropogenicinterferencewiththeclimatesystemconsistentwiththelong-termtemperaturegoaloftheParisAgreementthroughtheavoidanceorreductionofgreenhousegasemissionsortheincreaseofgreenhousegasremovals,includingthroughprocessinnovationsorproductinnovations”.Additionally,aneconomicactivityforwhichthereisnotechnologicallyandeconomicallyfeasiblelow-carbonalternativeshallqualifyascontributingsubstantiallytoclimatechangemitigationwhereitsupportsthetransitiontoaclimate-neutraleconomyconsistentwithapathwaytolimitthetemperatureincreaseto1,50Cabovepre-industriallevels,includingbyphasingoutgreenhousegasemissions,inparticularemissionsfromsolidfossilfuels,andwherethatactivity:(a)hasgreenhousegasemissionlevelsthatcorrespondtothebestperformanceinthesectororindustry;(b)doesnothamperthedevelopmentanddeploymentoflow-carbonalternatives;and(c)doesnotleadtoalock-inofcarbon-intensiveassets,consideringtheeconomiclifetimeofthoseassets.(theso-called“Transitional”activities).SubstantialcontributionisfurtherdefinedbytheTechnicalScreeningCriteria,whicharethecentralfeatureoftheTaxonomyandcontainedintheEUTaxonomyClimateDelegatedActandwhatareusedforcomparisonintheCGTpresentedbelow.Notethatsteps2and3abovearenotewithinthescopeoftheCGTaspresentedinthisdocument.EUTaxonomyprocessforidentificationofagreenactivity19ChinaTheChinaTaxonomypresentsadetailed‘whitelist’ofeligibleeconomicactivitiesandprojectsundervarioussectorsandsubsectors.Itisexplicitaboutbestavailablelow-emissionandcleanproductiontechnologicalsolutionsonthedomesticmarkethencenot‘technologyneutral’.Activitiescanbeeligibleonlyiftheactivityhasbeenincludedinthelist.ActivitiesthatareincludedintheChinaTaxonomyiftheyhavebeenassessedtomeetthefollowingcriteria:1.Serveoneormoreofthethreeenvironmentalobjectives2.AlignwiththerequirementslistedintheexplanatorynotesoftheGreenIndustryGuidingCatalogue(2019Edition)andthecorresponding“instructions/conditions”oftheChinaTaxonomy.3.Adheretoasetofscience-basedandconsistentmeasures4.RespectChina’spresentstageofdevelopment5.Complywithrelevantsafety,environmentalprotectionandqualityregulationsandpolicies.Andpolicydocumentsandstandardspecificationreferredtointhetaxonomyarethelatestversionandwithinthevalidperiod2.2.5.LegalframeworkThedocumentsettinguptheprinciplesoftheEUTaxonomyRegulation(orLevel1text)waspublishedon18June2020andtookeffect20daysafteritspublicationintheOfficialJournaloftheEU(OJ).TheTaxonomyRegulationempowerstheEuropeanCommissiontoadoptthefollowing‘DelegatedActs’(orLevel2regulations)thatwouldprovidethedetailedrequirements:•AfirstDelegatedAct,formallyadoptedon4June2021forscrutinybytheco-legislators:technicalscreeningcriteriaforidentifyingsomepriorityactivitiesmakingsubstantialcontributiontoclimateobjectives.•Aseconddelegatedactfortheremainingobjectives(objectives3-6)willbepublishedin2022.•FurtherDelegatedActswilladdadditionalsectorsandcriteriagoingforward.•AnadditionalDelegatedActadoptedon6July2021supplementingArticle8oftheTaxonomyRegulation,whichdetailsthedisclosurerequirementsforlargecompanieswithregardtotheEUTaxonomy.20ThePBoC,NDRC,andtheCSRCjointlyreleasedthe"GreenBondEndorsedProjectsCatalogue(2021Edition)"-referredtointhisdocumentastheChinaTaxonomy.ItcameintoeffectnationwideonJuly01,2021.Itworkstogetherwiththeinformationdisclosureandgreenbondissuanceguidelines22,23,24publishedbythethreejurisdictionstoenablehealthygrowthofChina’sgreenbondmarket.2.2.6.ClassificationframeworkTheEuropeanUnionTheEUTaxonomyislargelybasedontheNACE(NomenclaturestatistiquedesActivitéséconomiquesdanslaCommunautéeuropéenne)25,classificationsystemasfollows:1.Forestry1.1.Afforestation1.2.Rehabilitationandrestorationofforests,includingreforestationandnaturalforestregenerationafteranextremeevent1.3.Forestmanagement1.4.Conservationforestry2.Environmentalprotectionandrestorationactivities2.1.Restorationofwetlands3.Manufacturing3.1.Manufactureofrenewableenergytechnologies3.2.Manufactureofequipmentfortheproductionanduseofhydrogen3.3.Manufactureoflowcarbontechnologiesfortransport3.4.Manufactureofbatteries3.5.Manufactureofenergyefficiencyequipmentforbuildings3.6.Manufactureofotherlowcarbontechnologies3.7.Manufactureofcement3.8.Manufactureofaluminium3.9.Manufactureofironandsteel3.10.Manufactureofhydrogen3.11.Manufactureofcarbonblack3.12.Manufactureofsodaash3.13.Manufactureofchlorine3.14.Manufactureoforganicbasicchemicals3.15.Manufactureofanhydrousammonia3.16.Manufactureofnitricacid3.17.Manufactureofplasticsinprimaryform4.Energy4.1.Electricitygenerationusingsolarphotovoltaictechnology4.2.Electricitygenerationusingconcentratedsolarpower(CSP)technology4.3.Electricitygenerationfromwindpower4.4.Electricitygenerationfromoceanenergytechnologies4.5.Electricitygenerationfromhydropower4.6.Electricitygenerationfromgeothermalenergy4.7.Electricitygenerationfromrenewablenon-fossilgaseousandliquidfuels4.8.Electricitygenerationfrombioenergy4.9.Transmissionanddistributionofelectricity22Latham&WatkinsLLP,China’sSecuritiesRegulatorIssuesNewGreenBondGuidelines,2017(https://www.latham.london/2017/04/chinas-securities-regulator-issues-new-green-bond-guidelines/#:~:text=The%20China%20Securities%20Regulatory%20Commission%20%28CSRC%29%20released%20new,Initiative%20considered%20did%20not%20qualify%20as%20green%20bonds%29)23ChinaIssuesFirstOperatingGuidanceforGreenBondEvaluationAgencieshttps://www.senecaesg.com/blog/china-issues-first-operating-guidance-for-green-bond-evaluation-agencies/24Seneca,GreenFinancePlatform,GreenBondGuidelinesIssuedbyChina'sNationalDevelopmentandReformCommission(NDRC),2016(https://www.greenfinanceplatform.org/policies-and-regulations/green-bond-guidelines-issued-chinas-national-development-and-reform)25AlthoughEUTaxonomyisbasedlargelyonNACE,thereisnopossibilityofdirectlyusingsingleNACEcodesinallcases.ManyactivitiescutacrossseveralNACEcodes,someNACEcodeshavemultipleactivitiesunderthemandsome,suchasbuildingconstruction,areactuallyapplicableacrossalmostanyNACEcodessector.(refalsolaterinsection3.2.2-suggesttomakeacross-reference).SomemitigationactivitieshavenoNACEcodes.214.10.Storageofelectricity4.11.Storageofthermalenergy4.12.Storageofhydrogen4.13.Manufactureofbiogasandbiofuelsforuseintransportandofbioliquids4.14.Transmissionanddistributionnetworksforrenewableandlow-carbongases4.15.Districtheating/coolingdistribution4.16.Installationandoperationofelectricheatpumps4.17.Cogenerationofheat/coolandpowerfromsolarenergy4.18.Cogenerationofheat/coolandpowerfromgeothermalenergy4.19.Cogenerationofheat/coolandpowerfromrenewablenon-fossilgaseousandliquidfuels4.20.Cogenerationofheat/coolandpowerfrombioenergy4.21.Productionofheat/coolfromsolarthermalheating4.22.Productionofheat/coolfromgeothermalenergy4.23.Productionofheat/coolfromrenewablenon-fossilgaseousandliquidfuels4.24.Productionofheat/coolfrombioenergy4.25.Productionofheat/coolusingwasteheat5.Watersupply,sewerage,wastemanagementandremediation5.1.Construction,extensionandoperationofwatercollection,treatmentandsupplysystems5.2.Renewalofwatercollection,treatmentandsupplysystems5.3.Construction,extensionandoperationofwastewatercollectionandtreatment5.4.Renewalofwastewatercollectionandtreatment5.5.Collectionandtransportofnon-hazardouswasteinsourcesegregatedfractions5.6.Anaerobicdigestionofsewagesludge5.7.Anaerobicdigestionofbio-waste5.8.Compostingofbio-waste5.9.Materialrecoveryfromnon-hazardouswaste5.10.Landfillgascaptureandutilisation5.11.TransportofCO25.12.UndergroundpermanentgeologicalstorageofCO26.Transport6.1.Passengerinterurbanrailtransport6.2.Freightrailtransport6.3.Urbanandsuburbantransport,roadpassengertransport6.4.Operationofpersonalmobilitydevices,cyclelogistics6.5.Transportbymotorbikes,passengercarsandlightcommercialvehicles6.6.Freighttransportservicesbyroad6.7.Inlandpassengerwatertransport6.8.Inlandfreightwatertransport6.9.Retrofittingofinlandwaterpassengerandfreighttransport6.10.Seaandcoastalfreightwatertransport,vesselsforportoperationsandauxiliaryactivities6.11.Seaandcoastalpassengerwatertransport6.12.Retrofittingofseaandcoastalfreightandpassengerwatertransport6.13.Infrastructureforpersonalmobility,cyclelogistics6.14.Infrastructureforrailtransport6.15.Infrastructureenablinglow-carbonroadtransportandpublictransport6.16.Infrastructureenablinglowcarbonwatertransport6.17.Lowcarbonairportinfrastructure7.Constructionandrealestateactivities7.1.Constructionofnewbuildings7.2.Renovationofexistingbuildings7.3.Installation,maintenanceandrepairofenergyefficiencyequipment7.4.Installation,maintenanceandrepairofchargingstationsforelectricvehiclesinbuildings(andparkingspacesattachedtobuildings)7.5.Installation,maintenanceandrepairofinstrumentsanddevicesformeasuring,regulationandcontrollingenergyperformanceofbuildings7.6.Installation,maintenanceandrepairofrenewableenergytechnologies7.7.Acquisitionandownershipofbuildings8.Informationandcommunication8.1.Dataprocessing,hostingandrelatedactivities8.2.Data-drivensolutionsforGHGemissionsreductions229.Professional,scientificandtechnicalactivities9.1.Closetomarketresearch,developmentandinnovation9.2.Research,developmentandinnovationfordirectaircaptureofCO29.3.ProfessionalservicesrelatedtoenergyperformanceofbuildingsChinaTheChinaTaxonomy(2021)hasafour-levelclassificationstructureandincludessixCategoriesand204activitiesintotal.SixcategoriesSectorclassificationSectorspecificationProgram1.Energy-savingandEnvironmentalProtectionIndustry1.1Energy-efficiencyimprovement1.2Sustainablebuilding1.3Pollutionprevention1.4WaterConservationandUnconventionalWaterResources1.5Comprehensiveutilizationofresources1.6Greentransportation14items62programs2.CleanProductionIndustry2.1.Pollutionpreventionandtreatment2.2Greenagriculture2.3Comprehensiveutilizationofresources2.4Watersaving,andefficientuseofnon-conventionalwaterresources8items19programs3.CleanEnergyIndustry3.1Energyefficiencyimprovement3.2CleanEnergy4items26programs4.EcologyandEnvironment-relatedsector4.1EcologicalAgriculture4.2Ecologicalprotectionandconstruction5items28programs5.SustainableUpgradeofInfrastructure5.1Energyefficiencyimprovement5.2Sustainablebuildings5.3Pollutionprevention5.4WaterSavingandNon-conventionalWaterResources5.6EcologicalProtectionandConstruction11items38programs6.GreenServices6.1Consultancy6.2OperationManagementServices6.3Audit,InspectionandEvaluationofProjects6.4MonitoringandDetection6.5PromotionandCertificationofTechnicalProducts6items31programsForeachactivity,theclassificationstructureoftheChinaTaxonomytakesa‘whilelist’approachandisnotlinkeddirectlytoChina’sindustrialclassificationssystem.Anexampleisprovidedasbelow.CategorySectorclassificationSectorspecificationProgramDescription/Condition1.Energy-savingandEnvironmentalProtectionIndustry1.2Sustainablebuilding1.2.1GreenBuildingMaterials1.2.1.1ManufacturingofGreenBuildingMaterialsManufacturingandconsumptionofgreenbuildingmaterials/productsincludingenergy-savingwallmaterials,thermalinsulationmaterialsforexteriorwalls,energy-savingglass,prefabricatedbuildingcomponents,ready-mixedconcrete,ready-mixedmortar,etc.Thepropertiesofproductsandtechnicalspecificationsshouldmeetnationaland23industrialrelevanttechnicalrequirementsforgreenbuildingmaterials/products.Glassproductsforexteriorwallsshallreducelightpollutionandurbanheatislandeffect.243.CommonGroundTaxonomyMethodology3.1.Scopeofanalysis3.1.1.ObjectivesandscreeningcriteriaTheEuropeanUnionFromtheEUperspective,thisinitialanalysisoftheCGTcoverstheclimatemitigationobjectiveandallcorrespondingtechnicalscreeningcriteriatoanalysesubstantialcontribution.Theanalysislookedindetailateachofthetechnicalscreeningcriteriaforeachlineand,whererelevant,otherapplicableEUregulation.ItdoesnotcovertheAdaptationobjective,theDoNoSignificantHarmandtheMinimumSocialSafeguards-seeChapter6forsomediscussionChinaTheactivitiesspecifiedintheChinataxonomytargetsallofitsthreeenvironmentalobjectives,butarenotmappedtocorrespondingobjectiveslikeintheEUTaxonomy.Giventheneedtoassessbothtaxonomies,theclimatechangeobjectivewasmostcomprehensivelycoveredasthismappedtotheEUobjectiveofclimatechangemitigation.TheChinaTaxonomycoversfourlevelsofgranularityaswellasadescriptionforeach.therequirementslistedintheexplanatorynotesoftheGreenIndustryGuidingCatalogue(2019Edition)26andthecorresponding“instructions/conditions”oftheChinaTaxonomy27wereanalysedagainsttheEUactivitydescriptionandtechnicalscreeningcriteria.TheserelevantregulationsandcodesinChinawhichwereanalysedonabest-effortsbasistounderstandthecomparabilityinsomedetail.262019GreenIndustryGuidingCatalogue(http://www.cnstandards.net/index.php/2019-green-industry-guiding-catalogue/)27GreenBondEndorsedProjectsCatalogue,2021Edition(http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4342400/2021091617180089879.pdf)253.1.2.PrioritysectorsPriortoanalysis,ananalysiswascarriedouttoidentifythehighestimpactsectors,basedonemissionlevels,tofocusonfortheinitialiterationoftheCGT.ISICLevel1EUTaxonomyLevel1ChinaPriorityA.Agricultureforestryandfishing1.Forestry4.EcologyandEnvironment-relatedsectorHighpriorityC.Manufacturing3.Manufacturing1.EnergySavingandEnvironmentalProtectionIndustry3.CleanEnergyIndustryPrioritisesomesub-sectorsD.Electricity,gas,steamandairconditioningsupply4.Energy3.CleanEnergyIndustry5.SustainableUpgradeofInfrastructureHighpriorityE.Watersupply;seweragewastemanagementandremediationactivities5.Watersupply,sewerage,wastemanagementandremediation.1.EnergySavingandEnvironmentalProtectionIndustry2.CleanProductionIndustryWaste=highpriorityWater=lowpriorityF.Construction7.Constructionandrealestateactivities.1.EnergySavingandEnvironmentalProtectionIndustry5.SustainableUpgradeofInfrastructureHighpriorityH.Transportationandstorage6.Transport5.SustainableUpgradeofInfrastructureHighpriorityJ.Informationandcommunication8.Informationandcommunication.6.GreenServicesNotincludedM.Professionalscientificandtechnicalactivities9.Professional,scientificandtechnicalactivities6.GreenServicesNotincluded2.Environmentalprotectionandrestorationactivities.Notincluded263.2.Sectionmapping3.2.1.MappingagainstISICasaneutralcodeTheInternationalStandardIndustrialClassificationofAllEconomicActivities(ISIC)istheinternationalreferenceclassification.AmajorityofcountriesaroundtheworldhaveusedISICastheirnationalactivityclassificationorderivedfromISIC.ThestatisticalclassificationofeconomicactivitiesusedintheEUcalledNACE(NomenclaturestatistiquedesActivitéséconomiquesdanslaCommunautéeuropéenne),isderivedfromISIC(theUnitedNations’InternationalStandardIndustrialClassification)ofallEconomicActivities.TheIndustrialClassificationforNationalEconomicActivities(ICNEA2017)ofChinaisalsoderivedfromtheUNISICRev.4.withadditionaldetailsatlowerlevels.Thereferencetoacommonclassificationsystemallowedthecomparisonoftaxonomiesbasedonaneutralcoderatherthantakingonetaxonomytocomparetheother.Italsohelpedtogroupactivitiesinaneutralwaywhenthereweredifferencesbetweenthescopeoftheactivitiesinthetwotaxonomies.Forexample,manyconstructionactivitiescouldbeclassifiedwithintheconstructionheadlinessectororwithintheindividualsectorsthattheyrelateto(e.g.constructionofwastetreatmentfacilities)–whereverpossible,itisreferredtoISICforthisgrouping.3.2.2.Challengesandsolutionsfound:codesmappedagainstmultipleactivities,activitieswithoutacodeetc.Whileuseful,inmanysectorsandactivities,ISIC(Rev4.)isnotsufficientlygranulartocaptureallthedetailedmappingandcomparisonthatisrequired.Thisisparticularlythecaseforemergingpotentiallyscalabletechnologies,suchashydrogenorcarboncapture,utilisationandstorage(CCUS).Industrialactivitiesareintendedtocovereconomicactivitiesratherthanenvironmentalobjectiveswhichmeansthat,forexample,“Electricpowergeneration,transmissionanddistribution”isthemostgranularlevelofdetailavailablewithinISICforelectricitygenerationbutthetypeoffuelthatisusedisnotcovered.Forthisreason,themapping,whilefollowingISICattheSectionandDivisionlevels,alsogoesbeyondISICasdepictedintheimagebelow.TherewerealsosomeareaslikeCarbonCapturethatdonotfitintoanISICclassificationframework.Thesewereputunder‘Other’attheend.ISICSectionISICDivisionGroupClassBeyondISICD,Electricity,gas,steamandairconditioningsupply35,Electricity,gas,steamandairconditioningsupply351,Electricpowergeneration,transmissionanddistribution3510,Electricpowergeneration,transmissionanddistribution•Electricitygenerationfromoceanenergytechnologies•Electricitygenerationfromhydropower•Electricitygenerationusingsolarphotovoltaictechnology27A,Agriculture,forestryandfishing02,Forestryandlogging021,Silvicultureandotherforestryactivities0210,Silvicultureandotherforestryactivities•Afforestation•ForestManagement•Rehabilitationandrestorationofforests3.3.Scenarioanalysismethodology3.3.1.Descriptionofapproach:whatisascenarioanalysismethodologyandwhywasitused?Oncethemappingcomplete,thedetaileddescriptionandtechnicalscreeningcriteriaforeachlinewerecomparedtoascribeeachlinewithascenariobasedontheircharacteristicsintermsofcomparability.Thismethodologyallowedusanalysewithoutrequiringeithertaxonomytochangeandwithoutrequiringeithertaxonomytoacceptotherstandardsorlawsasequivalenttotheirowncriteria.ThiswasacoreunderpinningoftheCGT–thatthecommongroundisbasedonwhatcurrentlyexistsratherthanhowfurthercommongroundmightbefoundifsmallchangesweremadetoeithertaxonomy.Forfuturework,seethediscussioninChapter6FutureconsiderationsFutureconsiderations.3.3.2.ScenariodescriptionScenario1:AreaswithclearoverlapsSomeactivitiesinthetwotaxonomiesassessedhaveoverlapsandcanbeconsideredcomparablewithinthescope/forthepurposeoftheCGTreport.Thesehavelittleneedforfurtheranalysis.Examplesincludeelectricitygenerationfromwindpower.Scenario2:EUcriteriaaremorestringentand/ordetailedScenario2wasassignedtoactivitieswhichwerecleartomapbutwheretheEUscreeningcriteriawereeithernarrowerinscopeormorestringentand/ordetailedthanChinesecriteria.Inthiscase,theEUcriteriaweredescribedintheCGTinmoredetail.AnexampleiselectricitygenerationfromhydropowerwhereEUcriteriaspecificquantitativescreeningcriteriatoprojectswhiletheChinesecriteriaarenotquantitativeinnature.Scenario3:Chinacriteriaaremorestringentand/ordetailedScenario3wasassignedtoactivitieswhichwerecleartomapbutwheretheChinacriteria(asputforwardinthetaxonomyitselforrelevantindustrialstandardsandregulations)wereeithernarrowerinscopeormorestringentand/ordetailedthanEUcriteria.Inthiscase,theChinacriteriaweredescribedintheCGTinmoredetail.Allscenario3activitieswereincludedintheCGT.Scenario4:IdentifiableoverlapScenario4wasassignedtoactivitiesthathavesomealignmentinscopeofactivities.Somescenario4activitieswereincludedintheCGTafteradditionalworkwasdonetounderstandthemappingandoverlap.However,giventhelackofclarityacrossthecriteria,itwasnotpossibletoassesstheircomparability–asaresultboththeEUandChinacriteriaweredescribed28Scenario5/6:UnclearoverlaporobviousdivergenceScenario5wasassignedtoactivitiesthatwereverydifficulttomapintheothertaxonomy–forexample,theEUincludescriteriaforlandfillsbuttheChinataxonomydoesnotincludelandfills.Scenario6wasassignedtoactivitieswheretherewasobviousdifferentiation.BothScenario5and6activitieswereexcludedfromtheCGT.3.4.StructureofCGTClimateMitigationActivitiesThecurrentCGTaccompanyingthisreportcomprisessevensections,sixteencategoriesand72activities(over79analysedindepth)thatfallintotheclimatemitigatearea.Thenumberofactivitiesforeachsub-groupisshowninthefollowingtable.SectionsCategoriesActivitiesA.Agriculture,forestryandloggingA1.Forestryandlogging4C.ManufacturingC1.Manufactureoflow-carbonfootprintmaterials3C2.Manufactureofcleanenergytechnologies10C3.Manufactureofcleanenergyvehicleandparts229C4.Manufactureofrecyclingequipment3C5.Manufactureofenergy-savingequipment13D.Electricity,gas,steamandairconditioningsupplyD1.Electricpowergeneration,transmissionanddistribution8D2.Steamandairconditioningsupply8E.Watersupply,sewerage,wastemanagement,andremediationactivitiesE1.Sewagesludgetreatment1E2.Wastecollection,treatmentandrecycling5F.ConstructionF1.Constructionandrenovationofbuildings2F2.Constructionoftransportinfrastructure4F3.Electrical,plumbingandotherconstructioninstallationactivities2H.TransportationandstorageH1.Landtransportincludingrailways5X.OthersX1.UndergroundpermanentgeologicalstorageofCO2X2.Hydrogenstorage2Intotal72Foreachactivity,thefollowingtabularformatisusedtopresentthenumber,name,description,criteria,associationwithrelevantEUorChinaactivities.CGTnumberandactivitynameEachactivityintheCGTisnumberedaccordingtoitsheadlinesectore.g.A1.1isAfforestationwhichisthefirstactivityundertheAgricultureandForestrysector.Nameofactivity–ChinaorEUnomenclatureisuseddependingonthescenario(e.g.forScenario2activities,generallyEUnomenclatureisused)DescriptionDescriptionofwhatiscoveredundertheactivity-ChinaorEUnomenclatureisuseddependingonthescenario(e.g.forScenario2activities,generallyEUnomenclatureisused)SubstantialcontributioncriteriaScopeofactivityDescriptionofTechnicalscreeningcriteriaAdditionalnotesProvidesreferencenumberswithintheassociatedactivitiesintheEUand/orChinaTaxonomy.Generally,ifitisScenario2(i.e.EUcriteriaareapplied),theadditionalnotesshowhowitismappedtoChina.Andviceversa.OverlapscenarioProvidethescenarioascribedduringtheCGTwork304.OverviewoftheCommonGroundTaxonomy4.1.OverviewofalignmentacrosssectorsTheCGTanalysiscoverssevensections,ofwhichthefirstsixarefromtheInternationalStandardIndustrialClassificationofAllEconomicActivities(ISIC),Rev.4:•Agriculture,forestryandfishing•Manufacturing•Electricity,gas,steamandairconditioning•Watersupply;sewage,wastemanagementandremediationactivities•Construction•TransportationandStorage•OthersTheCGTcontains72climatemitigateactivitieswhichareviewedbytheWGasthe“commonality”oftheEUandChinataxonomies.Thiscompareswith87activitieswithintheclimatemitigationcriteriaundertheEUTaxonomyand94climatemitigationactivitiescoveredundertheChinaTaxonomy.Thesefiguresdonotgiveafullunderstandingoftheoverlap.Forexample,undertheEU‘Manufactureofotherlowcarbontechnologies’isrepresented16timesasthereare16activitiesintheChinataxonomythathaveanarrowerscopethanthisandarespecifiedindividually.Further,whiletheChinataxonomycoversover200activities,manyoftheactivitiesintheCGTcovermultipleofthoseinasingleline.4.2.DoNoSignificantHarmCurrently,theDoNosignificantHarmcriterionoftheEUTaxonomyisnotcoveredwithintheCGTgiventhetechnicalcomplexityoftheexercise.Itisanticipatedthatthiswillbeanareaoffuturework.SomeinitialworkwasdoneearlyonintheresearchphasetoascertainthoseDNSHcriteriawhicharequantitativeinnatureandthereforepossibletobeassessedandcomparedinlinewithSubstantialContributioncriteria.Whileacomprehensiveassessmentisyettobecarriedout,initialanalysisshowsthatthereareanumberofcriteriafromtheEUandChinataxonomiesthatcanbemappedandcomparedinasimilarwaytoScenarioapproachnotedabove.4.3.MinimumSafeguardWhileminimumsafeguardsareusedinbothtaxonomies,thesearenotuniformacrosstaxonomiesandnoteasilycomparable.31Underarticle18oftheEUTaxonomyRegulation,economicactivitiesmustalsomeettherequirementsoftheminimumsocialsafeguardsincludingbutnotlimitedtoalignmentwith:●theOECDGuidelinesforMultinationalEnterprises,●theUNGuidingPrinciplesonBusinessandHumanRights,●theInternationalLabourOrganization(ILO)DeclarationonFundamentalPrinciplesandRightsatWorkanditsEightFundamentalConventions,and●theInternationalBillofHumanRights.Chinahasminimumsafeguardsinplace,referencingrelevantdomesticpoliciesandstandards.Thefocusofthoserequirements–whichincludetheSanitaryStandardsfortheDesignofIndustrialEnterprises,andtheRegulationsonLabourSecurityInspection–ismoreonEnvironmental,HealthandSafety(EHS).4.4.Climatechangeadaptation-relatedactivitiesWhilesomeattemptsweremadetocovertheEU’sadaptationobjectiveundertheCGT,thishasproventobedifficultandasaresultmoreworkisrequiredinthisarea.ThetechnicalscreeningcriteriafortheclimatechangeadaptationobjectiveundertheEUTaxonomyarespecifiedforeachNACEcodeinthesamewayastheyareforclimatechangemitigationcriteria.IntheChinaTaxonomy,however,therearenocriteriaspecifiedasadaptationcriteriaundertheTaxonomyitselfand,generallyspeaking,theChinaTaxonomyplacesgreateremphasisonclimatemitigationaspartofitsclimatechangeobjective.However,thereareanumberoflocalcodes,standardsandregulationswhichhaveadaptationelementsincorporated.Duetothehugenumberofcodesthatwererequiredtobeassessed,itwasnotpossibletoassessthemforthisupdatedreport.UndertheEUstandard,adaptationcriteriaareverysimilaracrossactivitiesandareprocess-basedandhencemorequalitativeinnature.ThesecanbeseeninAnnexandwillbethesubjectoffuturework.325.Usability5.1.ChallengesandpotentialsolutionstoensuringusabilityforanalysisTheCGTasitcurrentlystandsprovidesastartingpointtoassesscommongroundacrosscertainfeaturesofthetwotaxonomies.Whilebesteffortshavebeenmadetotranslatelocalstandardsintometricsthatcaneasilybeusedforanalysisoftaxonomiesaroundtheworld,thereisstillsomewaytogoonthistoensuregreaterusability.ThefollowingsectionoutlinessomeofthechallengestousabilityforCGTanalysis.ThesechallengesarerelevantnotjusttotheEUandChinabutalsotootherjurisdictionswhichintendtopursueataxonomy-basedapproach.Referencetolocallegislation/codesTheCGTmakereferencestootherpiecesoflegislation–e.g.EuropeandirectivesandChinesestandards.Moreworkwillberequiredtomaketheseusefulforanalysisinotherjurisdictions.NeedtoimprovedataavailabilitySomeactivitiescontainedintheCGTspecifycriteriathatrelyontheavailabilityofdatawhichdoesnotexistinalljurisdictions.Forexample,EnergyPerformanceCertificatesarethenormintheEUbutarenotavailableuniversallyaroundtheworld.UnderstandinghowmetricscompareWhilesomeactivitiesdospecifyquantitativethresholds,theymakeuseofmetricsthatarenotcommonlyusedinotherjurisdictions.Electricitygeneration,forexample,hasfairlystandardisedmetricsthatarecomparableacrossjurisdictions.However,sectorslikebuildingsareverydifficulttocompareandmapacrossjurisdictionsanddataavailabilityalsovaries.Somebuildingcodesandregulationsutiliseenergyconsumptionmetrics,othershavestandardsforbuildingenvelopesandothersuseemissions.PrimaryEnergyDemand(PED)usedintheEUtaxonomyisanotherexampleofmetricsthatarenotcommonlyusedinotherjurisdictionsbuthasgoodcorrelationwithenergyconsumptionandGHGemissionsinmostinstances.Currently,theuseofothermetricsisnotpossibleintheCGTanalysiseveniftheymeetthesameobjectives(substantialreductioninemissionsfrombuildings).NeedtoevolvedynamicallyTaxonomiesarelivingdocumentsastheyfollowthedevelopmentoftechnologies,andtheymayexpandthecoverageovertime.Accordingly,regularrevisionsoftheCGTmaybenecessarytoensurethatitisup-to-date.336.Futureconsiderations6.1.PathwaytoincludeareasnotcurrentlyincludedinCGTThisfirstphaseoftheCGTpresentsadetailedanalysisoftheEUandChinaTaxonomies,withaninitialfocusonclimatemitigateactivities.ThefutureworkofCGTmayincludeadditionalareassuchasthefollowing:AdditionalsectorsAsnotedinChapter3.1.2,sectorswereprioritisedbasedontheirGHGemissionstobothjurisdictions,withsectorslikeservicesandICTnotcoveredinthisversion.ThesecanbeincorporatedinfutureversionstoprovidegreatercoverageofEUandChinataxonomies.AdditionalenvironmentalobjectivesandtransitionconsiderationsAstheEUputsforwardcriteriatocoverotherenvironmentalobjectives,thesewillbeanalysedforfuturework.TheChinaTaxonomyalreadycoversotherenvironmentalobjectives.Asalreadydiscussed,whileadaptationisalreadycoveredintheEU,itwasdifficulttoassessintheChinaTaxonomyduetothebreadthoflocalregulationsthatwouldneedtobeanalysedtoprovideanassessment.Thismaybeanareaoffuturework.AspointedoutbytheG20SustainableFinanceSynthesisReportandRoadmap,sustainablefinancetaxonomiesmaybeadaptedtofurtherrecognisetransitionactivities.Astaxonomiesevolvetoincludemoretransitionconsiderations,theCGTwillalsoreflectthesechanges.NewareasofalignmentinexistingactivitiesInsomeactivitieswheremappingalignmentwaschallenging,thereispotentialtodomoreresearchworktounderstandpossiblecommonalities.Futureworkmayalsoembedtransitionconsiderations.OthereligibilityfeaturesAsnoted,DNSHandminimumsafeguardsarenotcurrentlyexplicitlyanalysedwithinthescopeofthisexercise.Thesefeaturesandcriteriacouldbebroughtintostrengthenthecomparisonandinteroperabilitybetweenjurisdictions.OtherjurisdictionsOtherjurisdictionswhichintendtopursueataxonomy-basedapproachcanbeaddedtothisanalysisastheirtaxonomiesarefinalised.6.2.OptionstoincorporateotherjurisdictionsTheChinaandEUTaxonomiesweredevelopedthroughverydifferentprocessesatatimewhentherewaslimitedguidancearoundtaxonomiesorevenregularuseofthewordtaxonomyinthemarket.Thatisnolongerthecase.Thereisnowawealthofinformationandexpertiseonglobaltaxonomydevelopmentandexistingguidelinesacrossjurisdictions.Overtwentycountriesandregionsaroundtheworldarecurrentlyintheprocessofdevelopingtheirowntaxonomyorhavereleasedversionsforcomment.EvensincetheCGTworkwasstarted,thelandscapehaschangeddramatically.ThesubstanceandmethodologypresentedbyCGTprovideavaluabletooltofacilitatethefutureinteroperabilityoftaxonomiesworldwide.Itsanalysiscanbeusedandreferencedbyjurisdictions34whichintendtopursueataxonomy-basedapproachtopromoteacommonlanguageforassessinggreenassets.TheCommonGroundTaxonomy,andparticularly,theanalyticalmethodologywasalsodesignedtobeinclusiveandflexiblesoastoincorporatenewjurisdictionswhichdeveloptaxonomiesovertime.TheCGTpresentedhereisthereforejustthebeginning.TheIPSFisanorganisationwhichcurrentlyincludes18members,ofwhichatleastsevenareusingoractivelylookingtodevelopnationalorregionaltaxonomies.ItistheintentionthattheworkinggroupwilllooktoincorporatenewtaxonomiesintotheCGTastheybecomeavailablealthoughtheworkinggrouphasyettoestablishatimeframeofprocessfordoingthis.6.3.ReflectionofTaxonomyprinciplesoutlinedbytheIPSF-UNDESAinputpapertotheG20SustainableFinanceWorkingGroupAttherequestoftheG20SFWG,theIPSFandUNDESApreparedaninputpaperon“Improvingcompatibilityofapproachestoidentify,verifyandaligninvestmentstosustainabilitygoals”,whichinteraliaprovidesamappingandanalysisofexisting–underdevelopment–taxonomies.Thispapersetsoutthefollowingsevenhighlevelprinciplesforjurisdictionsandmarketsforthedevelopmentofcoherentapproachestoidentifyandaligninvestmentswithsustainabilitygoals:Principle1:MakeapositivecontributiontosupportSDGs.Approachestoaligninvestmentswithsustainablegoals,includingdefinitionsandtaxonomies,shouldaimtocreateapositivecontributiontoatleastoneofthe17sustainabledevelopmentgoals,includingenvironmental,climate,biodiversityandsocialobjectives.Principle2:Donosignificantharm.Approachestoaligninvestmentswithsustainablegoals,includingdefinitionsandtaxonomies,shouldensurethatactivitiesidentifiedbytheseapproachesdonosignificantharmtoanyofthe17SDGs,eveniftheselectedactivitymakespositivecontributiontosomeotherSDGs.Totheextentthatanalignmentapproachinvolvesaprocessforimplementation,itshouldalsointroducesafeguardstoensurethatapositivecontributiontooneobjectiveisnotgoingtobeoutweighedbynegativeimpactsonotherenvironmentalandsocialobjectives.Principle3:BeScience-based.Approachestoaligninvestmentswithsustainablegoals,includingdefinitionsandtaxonomies,shouldbeobjectiveinnature,supportedbyclearlydefinedanddisclosedmetricsandthresholdsthatalignwiththebestavailablescienceandareinternationallyinteroperable.Principle4:Bedynamic.Approachestoaligninvestmentswithsustainablegoals,includingdefinitionsandtaxonomies,willneedtoberegularlyreviewedandupdatedtoreflectthemarketchangeanddevelopmentofgreenandsustainabletechnologies,aswellasthechangeofbothdomesticandinternationalpolicyagendasandpriorities.Principle5:Betransparentandverified.Approachestoaligninvestmentswithsustainablegoals,includingdefinitionsandtaxonomies,shouldrelyon:(i)transparentandrobustmethodologies(includingfromprivatedataproviders)toidentifysustainableinvestmentopportunities;(ii)properdisclosurebyinvestmentmanagersandfinancialadvisorsmarketingsustainableinvestmentproductsandstrategies;and(iii)independentverificationmechanisms.Principle6:ContainafullercoverageofSDGs.Assomeapproachestoaligninvestmentswithsustainablegoals,includingdefinitionsandtaxonomies,aredevelopedwithaninitialfocusonclimate,35thereisaneedtoexpandovertimetheircoveragetoincludeotheraspectsofSDGs,suchasenvironment,biodiversityandsocialaspectsofsustainability.Principle7:Createacomprehensiveassessment-Approachestoaligninvestmentswithsustainablegoals,includingdefinitionsandtaxonomies,shouldconsidertheentireimpactofaninvesteeentity’sactivities,bothfromitsoperationalactivitiesandfromthevaluechainandusageofitsproductsandservices.Annex:Stocktakeofsustainablefinancetaxonomies(ExtractfromIPSF-UNDESAinputpaper)Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityChinaInuseGreenBondEndorsedProjectsCatalogue(2021Edition)releasedbythePBC,theNDRC,andtheChinaSecuritiesRegulatoryCommission(CSRC).i.Environmentalimprovement,ii.Addressingclimatechange,andiii.Moreefficientresourceutilization6Level-Iindustrycategories:1.Energy-savingandenvironmentalprotectionindustry,2.Cleanerproductionindustry,3.cleanenergyindustry,4.eco-environmentindustry,5.greenupgradingofinfrastructure,6.Greenservices.MandatoryforgreenbondsissuanceWhitelistBinary(green/notgreen)Activitieslinkedtoindustry-specificgreenstandardsandcriteriasetbycompetentregulatoryauthorities.EUInregulationwithadditionaldelegatedactstofollow(i)CCM,(ii)CCA,(iii)sustainableuseandprotectionofwaterandmarineresources,(iv)transitiontoacirculareconomy,(v)pollutionpreventionandcontrol,(vi)andprotectionandrestorationofbiodiversityandecosystemsTaxonomybasedonNACEcodes(EUindustryclassificationderivedfromUNISICcode).9broadcategorieswithadditionalNACEsubcategories.Activitieswithinselectsectors7sectors:1.Agriculture&forestry,2.Environmentalprotectionandrestorationactivities,3.Manufacturing,4.Energy,5.Waterandwaste,6.Transport,7.Buildings,8.ICT&9.ProfessionalservicesTaxonomycoverseconomicactivitiesofroughly40%oflistedcompanies.MandatoryforEUMemberstates,LargecorporateandfinancialmarketparticipantsWhere:Taxonomytobeusedasreferenceforgreeninvestmentfunds(e.g.,retailfundsandgreenbonds)Taxonomytobeusedfordisclosure(e.g.,investorsandlargecompaniestodiscloseshareoftaxonomy-alignedinvestments/activities).TechnicalScreeningCriteria“DoNoSignificantHarm”principleMinimumsocialsafeguardsRoomfortransitionandenablingactivitiesJapanInuseFocusontransitionpathwaysforhighemittingcompanies/sectorsandRoadmapstoCarbonNeutralityby2050aretheattachmentstotheBasicGuidelines.TargetsectorstoGuidelinesreleasedarelegallynon-bindingPrinciples-basedguidelineswithforthcomingcasesstudiesandIndustry37Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityBasicGuidelinesonClimateTransitionFinancereleasedinMay2021UnderdevelopmentMETIhassetupaRoadmapTaskforcetoformulatesector-specificroadmaps.ensurethecredibilityoftransitionfinancelabel.bepublishedin2021includesteel,chemistry,electricpower,gas,petroleum,cementandpaper/pulptransitionpathwaysforsectorsSouthAfricaPublished,inuseInitialcoverage:(i)CCM,(ii)CCAFuturecoverage:(iii)Sustainableuseandprotectionofwaterandmarineresources,(iv)Sustainableresourceuseandcircularity,(v)Pollutionprevention,(vi)EcosystemprotectionandrestorationBasedonSICcodeCovers:1.Agricultureforestry,fisheriesandlanduse;2.Industry;3.Energy;4.Waterandwaste;5.Transportation;6.ICT;7.Construction;Enablingactivities,systemresilienceandinnovation;8.SocialresilienceCoverstransitionandenablingactivitiesVoluntaryforarangeoffinancialinstrumentsTechnicalScreeningCriteria+“DoNoSignificantHarm”criteria+MinimumsafeguardsRussiaPublishedPartofRussia‘GreenFinanceGuidelines’(i)Environmentalimprovement;(ii)Pollutionreduction;(iii)Greenhouseemissionsreduction;(iv)Energyefficiencyenhancement;(v)CCATaxonomycovers9sectorcategories:1.wastemanagementandrecycling,2.energy,3.construction,4.industrialproduction,5.transport,6.watersupplyandwastewaterdisposal,7.forestry,8.conservationofnaturallandscapesandbiodiversity,9.ICTFinancialinstrumentsbutnotgovernmentfinancialinstrumentsWhitelistMandatoryverificationtoobtaingreencertificationforafinancialinstrumentKazakhstanUnderdevelopmentTBCTBCAnticipatedtocovergreenfinanceinstrumentssuchasTheRulesforrecognizingtechnologiesas“green”technologies,willoutlinethe38Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityTheNewEnvironmentalCodeofKazakhstanisexpectedtocomeinforceinJuly2021,whichwillinclude:definitionsofgreentechnologies,greenfinance,greenprojects,classificationofgreenprojects(taxonomy),greenbondsandgreenloans.greenbonds,loans,technologies,andprojects.WillincludeaRegisterofgreentechnologiesandprojects–adigitaldatabasethatgathersinformationongreentechnologiesandprojectsprocedureforrecognizingtechnologiesandprojectsasgreen,verificationofgreenactivitieswithaccordancetothegreentaxonomy,functionsoftheServiceOperator.KoreaPublished,inuse‘K-taxonomy’availableinKorean(i)CCM,(ii)CCA,(iii)sustainableconservationofwater,(iv)circulareconomy,(v)pollutionpreventionmanagement,(vi)biodiversityconservation53activitiesin9majorcategories:1.Energy,2.Manufacturing,3.Citiesandbuildings,4.Transportation,5.Resourcecirculation,6.CO2capture,7.Water.,8.Biodiversity&Agriculture,9.Researchandeducation.ItisrecommendedtoappliedtogreenprojectsselectedinaccordancewiththeKoreanGreenBondGuidelines.Itisexpectedtobeappliedtogreenbondsfirstandthentoothergreenfinancialactivitiese.g.greenloansandgreenfunds.Itisnotedthatthetaxonomymayalsobeusedbyanyentityorfinancialinstitutiontoassessthesustainabilityofanindividualassetsortodisclosetheproportionofsustainableassetsofanentity.SimilarstructuretoEUTaxonomy,substantialcontribution+DNSH+minimumsafeguards.AlsocontainsexclusionscriteriaMongoliaApprovedMongoliaGreenTaxonomy(i)CCMandCCA,(ii)pollutionprevention,(iii)resourceconservation,and(iv)livelihoodimprovementItincludeslivelihoodimprovementasoneofitsCovers58activitiesfromeightsectors8sectorcategoriesare:1.renewableenergy;energyefficiency;2.pollutionpreventionandcontrol;Thetaxonomyisdesignedtobeappliedforawiderrangeoffinancialinstruments,includingloans,bonds,equityinvestment,insurance,etc.BeyondtheeligibilityofgreenfinancialWhiteListItstipulatesalistofactivitiesconsideredasenvironmentallysustainableforinvestmentpurposesand39Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityoverallobjectives,addingasocialelementtothetaxonomysustainableagriculture,landuse,forestry,bio-diversityconservationandecotourism;low-pollutionenergy;greenbuildings;sustainablewaterandwasteuse;andcleantransportproducts,itisalsousedforbankstoreportexposuresandforthecentralbanktotrackthedevelopmentofitsgreenloanmarketsdoesnotprovidetechnicalcriteriaIndiaUnderdevelopmentPhase1expectedtobecompletedin2022(notethatIndiahasgreenbondguidelinesinplacebuttheseareseparatetoadetailedtaxonomy)UnderdiscussionUnderdiscussionUnderdiscussionUnderdiscussionSriLankaPublished,inuseCentralBankofSriLankawithtechnicalassistancefromIFCi.CCMii.CCAiii.OtherenvironmentalobjectivesBasedonCommonGroundTaxonomywithadditionalactivitiesVoluntaryuseacrossawiderangeofinstrumentsSomethresholds,whitelistactivitiesandlabelsUtiliseselementsofChinaandEUtaxonomiesBangladeshExisting:BangladeshBank(BB)publishedaSustainableFinancePolicyforBanksandFinancialInstitutionsinDecember2020Indevelopment:GreenBondtaxonomy(notyetpublished)Existing:(i)CCM,(ii)CCA,(iii)sustainableprotectionofwaterandmarineresources,(iv)transitiontoacirculareconomy,wastepreventionandrecycling,(v)pollutionpreventionandcontrol,(vi)protectionandrestorationofbiodiversityandhealthyecosystemsExisting:1.Renewableenergy,2.Energyefficiency,3.Alternativeenergy,4.Waste,5.Recycling,6.GreenBrickproduction,7.GreenbuildingsIndevelopment:LikelytoalignwithEUtaxonomysectorcoverageExistingItisusedtoencourageandsupervisebanksandFIstograntsustainableloansandconductsustainableinvestments.Thelistofgreenproducts/projects/initiativesisalsousedaseligibilitycriteriaforwhetherbankassetscanberefinancedwithBBundertheRefinanceSchemeforGreenFinance.IndevelopmentExisting:1.Mustmakesubstantialcontributiontoenvironmentalobjectives,+2.DNSH+3.minimumsocialandgovernancesafeguards.SimilartoEUatahighlevelexceptthattheeligibilityisdefinedusingaWhitelistapproachwhereaListofeligibleGreenProducts/Projects/Initiativesisprovided.Listofeligibleprojectspossiblyinsyncwithlocalconditionsand40Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityMandatorynatureoffuturetaxonomyisyettobeconfirmed.shouldcreatewidespreadawarenessofsustainabilityandenvironmentalissuesforbanksandFI.ItalsoprovidestwoexclusionlistsofeconomicactivitiesconsideredineligibleforfinancingandsustainablefinancerespectivelyIndevelopment:LikelytouseTSCapproachASEANPublished,underconsultationTheassociationofASEANcentralbankshassetupanASEANTaxonomyBoardtodevelop,maintainandpromoteamulti-tieredASEANTaxonomyforSustainableFinance.Version1waspublishedinNovember2021andiscurrentlyundergoingconsultationClimatemitigationaswellastransitionobjectivesFoundationFrameworkisapplicabletoallsectorsPlusStandardwillbedevelopedinfutureforarangeofsecorsVoluntaryforASEANmembersstatesTrafficlightsystemusing2systems:FoundationFramework(FF)andPlusStandard(PS).FFisaqualitativeframeworkfoeassessingactivitiesPS(notyetfullydeveloped)willhavemultipletiersofcriteria/thresholdsIndonesiaPublished,inusePrimarilyclimatechangemitigationandadaptationaswellasenvironmentalprotectionandmanagement1)Agriculture,forestry&fisheries2)Energy3)Transportation4)Forestry5)Industry6)Waste&water7)Buildings&construction8)MiningVoluntaryIntendedusers:financialsector,investors,government,financialservicesandmonetaryauthority,internationalinstitutionsTrafficlightsystem,Criteriaputforwardin2categories:“green”and“towardsgreen”.Thresholdstoreflectthecountry'sobjectivesandcapacities41Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityVietnamUnderdevelopment,expectedearly2022TBCEnergy,Transport,Water,Buildings,LanduseandMarineresources,Industry,Waste,ICTUsingtheVietnamStandardIndustrialClassification(VSIC)Technicalscreeningcriteria(TBC)LikelymandatoryComparablemetricsandthresholdstoEUtodeterminewhetheraneconomicactivityisalignedwithVietnam’sclimate-transitionpathway.PhilippinesUnderdevelopmentaGreeninter-agencytaskforcewiththePhilippinesSecuritiesandExchangeCommissionandthecentralbankhasstartedtheprocessofdevelopingataxonomy.TBCTBCMalaysiaPublishedClimateChangeandPrinciple-basedTaxonomy(CCPT)publishedinApril20215GuidingPrinciples(GPs):(1)CCM,(2)CCA,(3)Nosignificantharmtotheenvironment,(4)Remedialmeasurestotransition,(5)ProhibitedactivitiesPrinciples1&2areapplicableattheactivitylevelwhereas3and4shouldbeapplicableattheentitylevel.ApplicabletoFinancialInstitutionstoassesswhetherfinancedactivitiesare(i)Climatesupporting(seeGP1to3);(ii)Transitioning(GP4)or(iii)Watchlist.Thisfacilitatesstandardizedreportingofclimate-relatedexposures.Principles-basedTaxonomyprovidesthe5principleswithexamplesastowhattypesofinvestmentqualifyundereach.Thislistisnon-exhaustive.SingaporeUnderdevelopmentPhase1releasedforpublicconsultationMay20224objectivesproposed:(i)CCM;(ii)CCA;(iii)Protectbiodiversity;(iv)PromoteresourceresilienceISICsectorsandsub-sectorsarecovered.Proposedsectors:Agriculture,construction&realestate,transportation,energy,industrial.FinancialsectorAcombinationofprinciple-basedcriteriaandquantifiablethresholdsforactivitiesviaa'trafficlightsystem'green(clearaligned),yellow(activitieswithpathwaystobecominggreen)andred(activitiesthatareinconsistentwiththetaxonomy).42Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityAdditionalenablingsectorsmayincludewaste,ICTandCCS.TheconceptualframeworkofthetrafficlightsystemwassetoutintheconsultationdocumentpublishedinJanuary2021,andthegranularcriteriaisnowbeingdeveloped.Othereligibilityfeatures:a)Donosignificantharm;b)nonegativeimpactoncommunities’socialandeconomicwell-being,unlessthetrade-offscanbejustifiedinthelongrun;c)nobreachlocallawsandregulations.ThailandIndiscussionWorkplantodevelopagreentaxonomyinitiatedFinancialsectorColombiaIndraft7objectives:(i)CCM;(ii)CCA(iii)Sustainableuseandprotectionofwaterandmarineresources;(iv)Transitiontoacirculareconomy(v)Pollutionpreventionandcontrol(vi)Protectionofhealthyecosystems(vii)Social/SDG8BroadcategoriesGreenLabelledfinancialinstrumentsVoluntary.NocertificationmechanismdiscussedTSCproposedOthereligibilityfeatures:MinimumsafeguardsandDNSHChileIndiscussionTaxonomyRoadmapforChilepublishedin2021Likelyclimatemitigation,adaptationandotherenvironmentalobjectivesPrioritysectorstoaddressareEnergy,Transport,Buildings,andIndustry(mining).LikelyleverageEUTaxonomy.Taxonomytype:Technicalscreeningcriterialikely43Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityMexicoIndraftincludessixelements:principles,criteria,methodologies,operationalandgovernancemechanisms,reportingframework,anddiffusionmechanisms.PotentialtoincludesocialobjectivesTBCTBCDominicanRepublicUnderdevelopmentUKUnderdevelopmentGreenTechnicalAdvisoryGroup(GTAG)announcedGTAGwillprovidetheUKgovernmentwithnon-bindingadviceonhowtoadapttheEUtaxonomyforUKpurposes.TBCLikelybasedonEUapproachTBCTBC-likelybasedonTSCapproachaspertheEUNewZealandInDraftPublishedinDec2020seekingstakeholderfeedbackSustainableAgriculture(SAFI)AgricultureonlyTobeusedbythefinancesectorinconsideringagriculturelendingandinvestmentAimstoseekequivalence,tobridgethegapbetweeninternationalanddomesticstandardsAustraliaIndraftPrivatesector-ledinitiative.TechnicalAdvisoryGroupannouncedMay2022Voluntary(likelyleveragingtheEUTaxonomy).44Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilityCanadaUnderdevelopment/OnholdIndustry-led(notconnectedtoaregulatoryframework/notagovernmentpolicydocument)OnholdduetoTransitionfocusedtaxonomy28andspecificallyonGHGemissionsreductionPartI:Transitiondefinition,principlesanddetailedcorporatedisclosuresrequirement.PartII:8sector-specifictransitiontaxonomy:(i)Energy(ii)Utilities,(ii)Agriculture,(iv)Forestry,(v)Cement,(vi)Steel(vii)Aluminium,(viii)Mineralmining.Likelyapplicabletotransition-basedfinancialinstruments(bondsandloans)Voluntaryclassificationtool()Activity-andsub-activitybased:alignedwithEU,CBIandICMA.CBITaxonomyInuse(i)CCMand(ii)CCANoreferencetoindustrialclassificationcode.TheCBItaxonomypresentseightcategories(energy,water,transport,buildings,landuseandmarineresources,industry,waste,andICT),withforty-fivesubcategoriesofeligibleassetsandprojects.Theuseofthetaxonomyismandatoryforcertifiedclimatebonds.“Trafficlights”:green(automaticallyeligible);orange(subjecttoeligibilitycriteria);andred(noteligible).TheCBI’sguidanceoneligibilitygoesbeyonditstaxonomy.IssuerswishingtocertifytheirbondsneedtocomplywiththedetailedSectorCriteria,theClimateResiliencePrinciples,andtheClimateTransitionPrinciples,(whererelevant).MDBs-IDFCCommonPrinciplesInUsesince2015–updatedin2021andinUsefromJan2021byMDBs(i)CCMand(ii)CCATable2:EnergyTable3:MiningandmetalproductionforclimateactionMainlyusedforthemonitoringandreportingofclimatefinancinginaconsistentmanneramongdevelopmentbanks,reportingtoOECD,UNFCCCDescriptiveeligibility:TheCommonPrinciplesintroducedefinitionsforCCMandCCA-relatedfinancing.Inclusionintheexhaustivelistofeligible28IIACletter,TaxonomyDevelopmentsandIssuancePotentialinCanadianTransitionBondMarketsin2021(https://iiac.ca/wp-content/uploads/Taxonomy-Developments-and-Issuance-Potential-in-Canadian-Transition-Bond-Markets-in-2021_February-2021.pdf).45Country/jurisdictionStateofplayObjectivesCurrentcoverage/granularityUsabilityApproachtoalignment/eligibilitymdb_idfc_mitigation_common_principles_en.pdf(eib.org)Table4:ManufacturingTable5:Agriculture,forestry,landuseandfisheriesTable6:WatersupplyandwastewaterTable7:SolidwastemanagementTable8:TransportTable9:Buildings,publicinstallationsandend-useenergyefficiencyTable10:Informationandcommunicationstechnology(ICT)anddigitaltechnologiesTable11:Research,developmentandinnovationTable12:Cross-sectoralactivitiesStandingCommitteeonFinanceetc.activitiesisdescriptiveandalthoughitincludesmanyqualitativecriteria,itisnotsubjecttoquantitativegreennessthresholdsTheCommonPrinciplesonCCMincludes“transition”-relatedprojects/activitiesatahighlevel,withthebackstopofprinciplessuchasavoidingcarbon-lockin,importanceoflong-termstructuralshifttowardsgreentechnologies,andreplacingtheoldtechnologiesbeforetheirlifetime(withadistinctionofgreenfieldvs.brownfieldinvestmentsinenergyefficiency).The2021CommonPrincipleswillbeoperationalisedoveraperiodoftwoyears.Attheendofthetwo-yearperiod,theMDBsandtheIDFCwilladjustthelist,ifrequired,basedontheirrespectiveexperience.Thelistofeligibleactivitieswillbereviewedregularlytoensurethatitaccountsfortechnologythatmayenabledeeperdecarbonisationofeconomicactivities.[1]https://iiac.ca/wp-content/uploads/Taxonomy-Developments-and-Issuance-Potential-in-Canadian-Transition-Bond-Markets-in-2021_February-2021.pdf46

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