Finance • Regulation: From China to Europe, taxonomies are increasing the transparency of financial markets
To guide investment decisions and capital allocation towards decarbonised or low greenhouse gas (GHG) emission activities, the world’s major economic powers are strengthening their extra-financial regulations. In particular, recent years have witnessed a trend towards increased regulation associated with so-called ‘green taxonomies’.
Since the introduction of the taxonomy in Europe and in several countries, it is difficult to believe that a return to the past is possible. The new regulation provides a framework for and fosters sustainable investment. Most of all, it limits greenwashing activities. The obligation to publish environmental information in a regulated and identical manner makes it possible to standardise and clarify the data collected. With a European SFDR regulation focused on the environmental impact of financial products, Europe is a global leader. The coming years will be critical for establishing the US regulation, for aligning existing regulations and for extending existing taxonomies to other environmental objectives as well as to ‘brown’ and ‘transitional’ activities.