What counts and what does not count in the world of ESG? Attempts to define and classify ESG have come from both market participants and regulatory bodies. The development of an EU Taxonomy in particular has accelerated the discussion about this worldwide.
To keep up with the ongoing innovation in the ESG space, taxonomy initiatives are likely to reflect regional or national priorities. Moreover, what is green and sustainable today, may not be fit for purpose in the future. With a lack of coordination, there is a risk that fragmentation slows the progress towards a sustainable future. Existing market and international taxonomies will need to be leveraged to avoid duplication of effort and ensure additionality. In particular, objectives need to be clear. Weather it is about classification, financial product regulation or disclosure.