Common framework of sustainable finance taxonomies for Latin America and the Caribbean

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Common framework of sustainable finance taxonomies for Latin America and the Caribbean

Common framework of sustainable finance taxonomies for LAC
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Taxonomies are being developed globally and in the Latin America and the Caribbean (LAC) region at a rapid pace and a lack of comparability could create hurdles for trade and international capital flows towards low-carbon projects. This paper presents a Common Framework for Sustainable Finance Taxonomies for LAC countries, which is intended to be a guidance document that can serve as a voluntary reference to orient different actors in the region (government and policy makers, development agencies or any other stakeholder) that are in the process of or intend to develop taxonomies in the region.

The framework aims to provide guidance for interoperability of taxonomies within LAC and globally. Interoperability implies that taxonomies must be based on similar guiding principles, have design elements such as objectives, classification systems for sectors and activities that are comparable and are similar in approaches and methodologies used for defining eligibility. The Guiding Principles established in this report helps achieve interoperability and ensures that the taxonomies are based on science.

This report prioritises sectors based on the objectives of climate change mitigation and climate change adaptation for LAC. It additionally provides guidance for inclusion of activities, as well as guidelines for the definition of metrics and thresholds for certain sectors of the taxonomy. The framework also provides guidance and considerations for Do No Significant Harm (DNSH) requirements for other environmental objectives and minimum social safeguards, but the substantial contribution to other environmental and social objectives are expected to be developed in future and is not part of the current report.