Arresting climate change will require trillions of investment, the vast majority of which must come from private investors. As issuers increasingly market their offerings to investors seeking green investments, how can they be sure they are putting their money to promote causes as intended?
The answer lies in what is known as a green or sustainable finance taxonomy. This is a classification system for identifying activities or investments that will move a country toward specific targets related to priority environmental or social objectives (ICMA 2021). They serve multiple purposes – providing a definition for what is ‘sustainable’ and thereby reducing ‘green-washing’, supporting ambitious sustainable development goals and building investor confidence of investors that they are contributing towards these outcomes and that their investments are not unintentionally doing harm to society or the environment. Click here to read the full article