1、 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
2、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 3 Acknowledgements This report was produced by the IPSF Taxonomy Wo
3、rking Group, co-chaired by Mr Marcel Haag for the European Commission and Dr Ma Jun for the Peoples 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 S
4、ean 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 (Lian
5、he Equator). . 4 Contents 1. Executive summary . 6 2. Introduction . 9 2.1. Background and Objectives . 9 2.1.1. Brief introduction of IPSFs Taxonomy Work . 9 2.1.2. The Common Ground Taxonomy (CGT): purpose, objectives and users. 9 2.1.3. Contribution of the CGT to global comparability and interope
6、rability of sustainable finance standards . 11 2.2. Overarching comparison of the EU and China taxonomies . 12 2.2.1. History of development process . 12 2.2.2. Objectives . 14 2.2.3. Scope . 15 2.2.4. Approaches to defining alignment /eligibility . 17 2.2.5. Legal framework . 19 2.2.6. Classificati
7、on framework . 20 3. Common Ground Taxonomy Methodology . 24 3.1. Scope of analysis . 24 3.1.1. Objectives and screening criteria . 24 3.1.2. Priority sectors . 25 3.2. Section mapping . 26 3.2.1. Mapping against ISIC as a neutral code . 26 3.2.2. Challenges and solutions found: codes mapped against
8、 multiple activities, activities without a code etc. . 26 3.3. Scenario analysis methodology . 27 3.3.1. Description of approach: what is a scenario analysis methodology and why was it used? . 27 3.3.2. Scenario description . 27 3.4. Structure of CGT Climate . 28 4. Overview of the Common Ground Tax
9、onomy . 30 4.1. Overview of alignment across sectors . 30 4.2. Do No Significant Harm . 30 4.3. Minimum Safeguard . 30 4.4. Climate change adaptation-related activities . 31 5. Usability . 32 5.1. Challenges and potential solutions to ensuring usability for analysis . 32 6. Future considerations . 3
10、3 6.1. Pathway to include areas not currently included in CGT. 33 6.2. Options to incorporate other jurisdictions . 33 5 6.3. Reflection of Taxonomy principles outlined by the IPSF-UNDESA input paper to the G20 Sustainable Finance Working Group . 34 6 1. Executive summary In July 2020, under the IPS
11、F, 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 Nove
12、mber 2021, the IPSF Taxonomy Working Group published the first version of the Common Ground Taxonomy (CGT) report, and issued a call 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
13、both the EU Sustainable Finance Taxonomy and Chinas 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 Chinas green taxonomies. This updated publication covers the
14、 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 jurisdic
15、tions, other eligibility features such as Do No Significant Harm were not covered within scope of the first phase. The Common Ground Taxonomy is The Common Ground Taxonomy is not An analysis on approaches of the EU taxonomy and China taxonomy, and the methodology for comparing and identifying common
16、alities and differences between some features of the two taxonomies - A legal documentation by the EU and China which entails requirement/obligation for either jurisdiction to change their taxonomy. An evolving tool that may help different actors to understand the types of activities that could be c
17、overed under the respective taxonomies within the scope of the comparison exercise - A single taxonomy or exclusive definition of environmentally sustainable economic activities covering all environmental objectives, such as biodiversity, pollution prevention, etc. A technical document for voluntary
18、 reference by interested parties within the limits of the scope of the comparison exercise - Covering all eligibility features or all activities in the EU and China taxonomies as explained in the instruction report. An analytical tool or reference for other jurisdictions to consider when developing
19、their own taxonomies - A proposal for international standards or legal document that imposes any global standard on other jurisdictions. 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 transpar
20、ency 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.
21、 The methodology underpinning the CGT is a key part of the value of this work. The first stage involved (1) extract climate change mitigation activities from the China Taxonomy, (2) mapping of all activities in both taxonomies to a neutral code so that they could be more easily compared. The 7 Inter
22、national Standard Industrial Classification of All Economic Activities (ISIC) was used as the international reference classification. (3) selection of priority sectors which would significantly contribute to carbon emission reduction or sequestration. The second stage involved evaluating the detaile
23、d description and technical screening criteria for each line to ascribe each line with a scenario based on their overlap as follows: Scenario 1: Areas with clear overlaps covers activities which have overlaps and can be considered comparable within the scope/for the purpose of the CGT report. Scenar
24、io 2: EU criteria are more stringent and/or detailed was assigned to activities where the EU screening criteria were either narrower in scope or more stringent and/or detailed than Chinese criteria. In this case, the EU criteria were described in the CGT in greater detail. Scenario 3: China criteria
25、 are more stringent and/or detailed was assigned to activities where the China criteria were either narrower in scope or more stringent and/or detailed than EU criteria. In this case, the China criteria were described in the CGT in greater detail. Scenario 4: Identifiable overlap was assigned to act
26、ivities that have some alignment in scope of activities, and could be defined by utilising both sets of eligibility criteria. Scenario 5/6: Unclear overlap or obvious differentiation: Scenario 5 was assigned to activities that were very difficult to map in the other taxonomy. Scenario 6 was assigned
27、 to activities where there was obvious differentiation. 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
28、air conditioning supply Water supply; sewage, waste management and remediation activities Construction Transportation and Storage These are detailed in the document as followed: CGT number and activity name Each activity in the CGT is numbered according to its headline sector e.g. A1.1 is Afforestat
29、ion which is the first activity under the Agriculture and Forestry sector. Name of activity China or EU nomenclature is used depending on the scenario (e.g. for Scenario 2 activities, generally EU nomenclature is used) Description Description of what is covered under the activity- China or EU nomenc
30、lature is used depending on the scenario (e.g. for Scenario 2 activities, generally EU nomenclature is used) Substantial contribution criteria Scope of activity Description of Technical screening criteria Additional notes Provides reference numbers within the associated activities in the EU and/or C
31、hina Taxonomy. Overlap scenario Provide the scenario ascribed during the research Future considerations 8 This first phase of the CGT presents a detailed analysis of the EU and China Taxonomies. Other areas missing could be incorporated into future work. Future work could include: Additional sectors
32、 such as like services and ICT; Additional environmental objectives as they are agreed within the EU process; Transition considerations as the EU and China taxonomies and taxonomies from other jurisdictions evolve to include more transition considerations; New areas of alignment in existing activiti
33、es where mapping alignment was challenging, there is potential to do more research work to understand possible commonalities; Other eligibility features such as DNSH and minimum safeguards could be brought in to strengthen the comparison and interoperability between jurisdictions;and Other jurisdict
34、ions will be brought in as their taxonomies are finalised. An important part of future work is that it dovetails with the work of the G20 Sustainable Finance Working Group (SFWG). At the request of G20 SFWG, the IPSF and the United Nations Department of Economic and Social Affairs (UNDESA) issued an
35、 input paper which provides a mapping and analysis of existing taxonomies and those under development.1 This paper sets out the seven high level principles for jurisdictions and markets for the development of coherent approaches to identify and align investments with sustainability goals. These prin
36、ciples and the G20 Sustainable Finance Roadmap will help guide the work of the IPSF and the CGT going forward. The IPSF Taxonomy Working Group will look to include more jurisdictions in its comparative analysis, and explore options to further enhance the interoperability of sustainable finance taxon
37、omies around the world. 1 Improving compatibility of approaches to identify, verify and align investments to sustainability goals (IPSF-UNDESA input paper for the G20 SFWG) https:/g20sfwg.org/wp-content/uploads/2021/09/G20-SFWG-DESA-and-IPSF-input-paper.pdf 9 2. Introduction 2.1. Background and Obje
38、ctives 2.1.1. Brief introduction of IPSFs Taxonomy Work The International Platform on Sustainable Finance (IPSF) is a multilateral forum that aims to enable exchange of practices and increase international cooperation on sustainable finance related matters. This in turn contributes to scaling up the
39、 mobilisation of private capital towards environmentally sustainable investments. Part of this work focusses on deepening cooperation on the development of “sustainable taxonomies” around the world and to help to mitigate fragmentation of global green/sustainability definitions as far as possible. O
40、ver twenty jurisdictions around the world have developed or are in the process of developing national or regional sustainable taxonomies (see Annex)2. Of these jurisdictions, China and the EU adopted their respective taxonomies into legislative frameworks. In July 2020, the EU and China have initiat
41、ed a Working Group on taxonomies (hereafter referred to as the “WG”) co-chaired by both jurisdictions and open to all IPSF members and observers. The WGs objectives are to undertake a comprehensive assessment of the existing taxonomies for environmentally sustainable activities, including identifyin
42、g the commonalities and differences in their respective approaches and outcomes. This work has become known as the IPSF “Common Ground Taxonomy”. 2.1.2. The Common Ground Taxonomy (CGT): purpose, objectives and users What is the Common Ground Taxonomy? The Common Ground Taxonomy (CGT) is a report re
43、sulting from an in-depth comparison exercise that puts forward areas of commonality between the EU and Chinas taxonomies. The first version of this CGT report was published in November 2021. This publication is the second version of the CGT report, which incorporates feedback received from the gener
44、al public between November 2021 and January 2022, and includes additional “confirmed“ activities that were considered as “pending activities” that are not covered in the first version. The current version of the CGT covers 72 climate mitigation activities that are recognized by both the EU and China
45、 taxonomies. The current version of the CGT covers only areas that are in the current scope of both taxonomies, in terms of objectives, eligibility criteria, activities and thresholds. If there are activities, objectives or eligibility criteria covered by the EU but not China (and vice versa), they
46、are not part of the CGT. To determine eligibility criteria for each activity, it puts forward the criteria that are compliant in both jurisdictions usually this means referring to the jurisdiction with narrower scope or more stringent/more detailed criteria although in some cases, criteria are the s
47、ame (and therefore directly eligible) or in others both sets of criteria should be used. The CGT does not entail any legal implications in either jurisdiction. It only covers climate change mitigation objective of the EU taxonomy and activities considered making substantial contribution to the said
48、objective. Thus, the detailed activities referenced in the CGT table accompanying this report should not be considered as automatically aligned with the EU taxonomy, as certain eligibility criteria of the EU taxonomy, such as the Do No Significant Harm (DNSH) criteria and the minimum 2 Ibid. 10 soci
49、al safeguards, are not considered by this report. The CGT does not yet cover the climate change adaptation objective of the existing EU Climate Delegate Act. The EU taxonomy will adopt criteria for the remaining four environmental objectives in 2022 and continue to be developed thereafter. However,
50、the report is a key milestone which provides the first comprehensive activity-by-activity mapping and comparison of the EU and China taxonomies, including relevant technical screening criteria. It creates an important methodology, as detailed in Chapter 3, for improving the comparability and interop
