FFA launches Guidebook for CSOs on Sustainable Finance Taxonomy

One of the policy initiatives to accelerate action towards the Paris Agreement or the UN Sustainable Development Goals is through the development of a taxonomy that clearly defines what contributing activities, projects, or companies need to be financed. In recent years, a number of countries, many of them in Asia, have been developing taxonomies, therefore, making this an opportune moment to highlight the importance of a strong civil society voice in the process. And it all starts by strengthening the capacity of local organizations to actively and meaningfully contribute to consultations and policy discussions, as well as raise awareness on key issues, risks, and impacts.

Across the Fair Finance Asia (FFA) network, civil society organizations (CSOs) are increasingly seeking engagement opportunities with policymakers and financial regulators to ensure greater commitment and accountability in the development of taxonomies that address a broader range of sustainability issues, encompassing the environment and human rights. There is cautious recognition that smartly designed policy levers and effective financial regulations have potential to contribute to positive outcomes such as for just energy transition in Asia. However, Asian CSOs have also learned from other countries’ experience that a taxonomy can be designed or applied in a way that allows the continuation of financing towards unsustainable practices and activities. Therefore, CSOs are realizing the need to step up their advocacy to ensure this is averted, by bringing into these discussions their perspectives rooted in data and evidence from working on sustainability issues on-the-ground.

It is our hope as FFA that, through this taxonomy guidebook with four learning modules, we will be able to contribute in building Asian CSOs’ foundational understanding of what taxonomies are, why and how they are developed, and how they are used and applied for their own countries’ context. We hope that this guidebook inspires learners from various backgrounds to further their own understanding of the relevant issues, by further reading and training, or by assessing the practical implications in concrete contexts. Finally, we hope that Asian CSOs are enabled to critically assess the key issues during the development of taxonomies in their own countries and the region overall, and to practically apply in their day to day work, what they learn from this guidebook.

Introduction & Module 1: This module defines what a taxonomy is – and what it is not – as well as the content, coverage, and distinguishing features of different kinds of taxonomies. 

Module 2: This module explains the different aspects of the processes in developing a taxonomy. Each aspect is important to consider when assessing the quality and effectiveness of a new or existing taxonomy. Additionally, this section provides insights into strategies and pathways to influence the decision-making process. 

Module 3: This module details how taxonomies are often utilized, including implementation planning, proposals for updating, regulations, laws, or voluntary standards being set in line with the taxonomy. 

Module 4: This module describes per FFA country (with the exception of Pakistan) whether and how taxonomies are being developed or agreed upon, as well as the objectives, the components that clarify how activities, projects, or companies are defined, and in line with the economic sectors that are covered. This is a living module that will be updated regularly in collaboration with FFA country coalitions and other regional allies. 

See the Guidebook here.