Green and Sustainable Taxonomies: Dimensions, challenges and difficulties

BORTZ PABLO GABRIEL

Conferencia; Jornadas de Economía Crítica y Feminista; 2024

Since its inception in 2007, the sustainable bond market has grown exponentially. The flow of new investments and the risks to financial stability posed by climate change require risk-assessment methodologies and standards aligned with environmental and social goals, which led to the development of green, social and sustainable taxonomies. The number of green taxonomies has multiplied in recent years, through supranational, national and private initiatives. This paper presents a review of the topics that arise due to the proliferation of green and sustainable taxonomies. Among these topics, the paper focuses on financial, sectoral and international impacts. It discusses a potential “green spaghetti-bowl” effect given by the proliferation of green taxonomies, the calls for interoperability and the problem of arbitrage, and the hierarchy of taxonomies that renders some unsuccessful as they seek to mobilize private finance. I discuss as well the sectoral implications of different taxonomies, different environmental metrics, and the (lack of) adoption of transition criteria. I then look at the financial implications of taxonomies: potential stranded assets, credit flows, and the link between taxonomies, ESG ratings and the danger of greenwashing. Finally, I survey the international dimension impact, in terms of trade and financial flows, and trade agreements.