Legal & Regulatory News

​GFMA publishes global guiding principles for developing climate finance taxonomies

16 June 2021

On 16 June 2021, the Global Financial Markets Association (GFMA) released a paper (the GFMA Paper) outlining several global guiding principles deemed necessary for developing climate finance taxonomies.

The GFMA Paper stresses the need for the global economy to be fundamentally transformed in order to achieve the climate targets set out within international commitments, such as the Paris Agreement. In order to support this transition, the GFMA Paper emphasises the need for coordination across sectors and regions, as well as considerable investment, estimated at $100–150 trillion by 2050. The GFMA Paper suggests globally harmonised, objective, science-based taxonomies will be key enablers for the necessary climate-aligned finance.

The GFMA Paper suggests the following principles to be considered in the development of globally consistent and comparable climate finance taxonomies:

taxonomies should be objective and backed up by unequivocal metrics and thresholds that are synchronised with international science-based targets;

the scope of taxonomies should be expanded beyond use of proceeds, capturing entity level activities and all eligible sources of capital;

taxonomies should have a consistent set of definitions and principles that are also adjustable for regional and temporal variation. In doing so, different transition pathways should become more aligned;

climate finance metrics should be defined and applied using science-based targets – balancing ease of use with transparency and robustness to examine climate impact and aid third party verification; and

climate finance taxonomies need to be governed by a robust and inclusive process maintaining transparency and the ability to be evolved as time passes.

Click here to access the GFMA Paper.