China, EU Publish Common Sustainable Finance Taxonomy

The PBOC says it will help promote China-EU green investment and financing cooperation and cross-border activities, while reducing the cost of green certification.

The People’s Bank of China (PBOC) has announced the completion of the initial phase of a project with the European Commission to establish a common taxonomy for sustainable finance.

The project was initiated in July 2020, following which the International Platform for Sustainable Finance (IPSF) established a working group to compare China’s catalogue of green bond-supported projects and the EU’s sustainable finance classification scheme.

The PBOC and European Commission served as co-chairs for the working group.

Based on a “comprehensive and detailed comparison”, the working group has compiled a “Common Ground Taxonomy”, which prescribes a list of economic activities that are recognised as having significant contributions to climate change mitigation.

The taxonomy covers six major categories including energy, manufacturing, construction, transportation, solid waste and forestry. It can be used to improve the comparability and future interoperability of taxonomies around the world.

According to the PBOC, having a common taxonomy will help promote China-EU green investment and financing cooperation and cross-border activities, while also reducing the cost of green certification for cross-border transactions.

Market entities can use the common taxonomy to issue and trade green financial products in the international market on a voluntary basis, the PBOC added.

The working group plans to further expand the taxonomy’s coverage to include more sustainable economic activities, while also promoting greater comparability, compatibility and consistency of global sustainable finance classification standards.

In its statement supporting the NGFS Glasgow Declaration, the Hong Kong Monetary Authority (HKMA) said, among other measures, that it aims to adopt the Common Ground Taxonomy across financial sectors in Hong Kong.

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