Sustainable Finance Taxonomies: Enabling the Transition towards Net Zero? A Transition Score for International Frameworks

Catherine Marchewitz, Fernanda Ballesteros, Franziska Schütze and Nesrine Hadj Arab

No 2083, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: A plethora of sustainable finance taxonomies are emerging worldwide to support shifting trillions for climate action. Employing a qualitative research approach, we use document analysis to assess 26 sustainable finance taxonomy frameworks worldwide that are in the developing phase or have been published and/or adopted. Based on literature and data we build a transition score (TS) to evaluate the framework’s potential contribution to transition to climate neutrality. We find that only few taxonomies meet most of our criteria for supporting the transition to carbon neutrality, although they are well embedded in environmental policy goals and cover mostly the important sectors in terms of emissions. The screening approach for economic activities is often not dynamic or aligned with a clear path to climate neutrality and the frameworks target often only specific financial products or a limited group of market participants. Most sustainable finance taxonomies do not carry disclosure and reporting obligations.

Keywords: Sustainable Finance Taxonomy; Green Finance; Transition Finance; EU Taxonomy; climate policy; transition plans (search for similar items in EconPapers)
JEL-codes: G18 P00 Q01 Q58 (search for similar items in EconPapers)
Pages: 51 p.
Date: 2024
New Economics Papers: this item is included in nep-ene and nep-env
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