Following the publication of the Common Ground Taxonomy Instruction Report in November 2021, the International Platform on Sustainable Finance (IPSF) launched a call for feedback to consult stakeholders on the Common Ground Taxonomy (CGT) activities’ table. The consultation ran from 4 November 2021 until 14 January 2022. In light of the feedback received and further assessments, the CGT activities’ table has been updated with additional activities contributing to climate change mitigation. The current version of the CGT covers 72 climate change mitigation activities that share common ground for both the EU and China taxonomies with regard to the “substantial contribution” criteria.

Common Ground Taxonomy – climate change mitigation

In July 2020, under the International Platform on Sustainable Finance (IPSF), the EU and China initiated a Working Group on taxonomies with the objectives to undertake a comprehensive assessment of the existing taxonomies for environmentally sustainable investments, including identifying the commonalities and differences in their respective approaches and outcomes.

In November 2021, the IPSF Taxonomy Working Group published the first version of the Common Ground Taxonomy (CGT) report, and issued acall for feedback to solicit comments. This publication is the second version of the CGT report, which now includes 72 climate mitigation activities that are recognized by both the EU Sustainable Finance Taxonomy and China’s Greed Bond Endorsed Project Catalogue.

The CGT is a milestone work resulting from an in-depth comparison exercise that puts forward areas of commonality and differences between the EU and China’s green taxonomies. This updated publication covers the initial phase of work which will be expanded over time.

The scope covers substantial contribution criteria for climate change mitigation, whilst other environmental objectives are yet not covered at this stage. Considering the difference of the environmental legislation system by different jurisdictions, other eligibility features such as Do No Significant Harm were not covered within scope of the first phase.

The CGT can be used to improve the comparability and future interoperability of taxonomies around the world. Hence, it intends to provide more clarity and transparency about the commonalities and differences between approaches and eventually lower the trans-boundary cost of green investments and scale up the mobilization of green capital internationally.

It also provides a solid methodology on the basis of which other taxonomies can be compared in the future.

“Different markets can use reference or common taxonomies on a voluntary basis. Such use can facilitate cross-border sustainable financial flows for example by reducing the costs of verifications. For jurisdictions or markets that want to use a taxonomy, but do not have the resources to develop their own taxonomies, they can also choose to adopt an existing taxonomy. Regions with a large number of relatively small economies or markets (e.g., Africa, Central Asia, and Latin America) can consider regional collaboration on taxonomies, including development of taxonomies, to avoid market segmentation and illiquidity while promoting cross-border investment.”

2021 G20 Synthesis Report of Sustainable Finance Working Group

The Common Ground Taxonomy analysed 79 activities across six sectors in the International Standard Industrial Classification of All Economic Activities (ISIC), Rev. 4:

• Agriculture, forestry and fishing
• Manufacturing
• Electricity, gas, steam and air conditioning supply
• Water supply; sewage, waste management and remediation activities
• Construction
• Transportation and Storage

Common Ground Taxonomy report can be downloaded here.

Common Ground Taxonomy – climate change mitigation

Source: EU Commission