In a joint effort to streamline environmentally sustainable investments, the European Union (EU) and China, under the International Platform on Sustainable Finance (IPSF), established a Working Group on taxonomies in July 2020. The group aimed to assess existing taxonomies, identifying commonalities and differences. In November 2021, the IPSF Taxonomy Working Group unveiled the first version of the Common Ground Taxonomy (CGT) report, which has now been updated to include 72 climate mitigation activities acknowledged by both the EU Sustainable Finance Taxonomy and China’s Green Bond Endorsed Project Catalogue.

The CGT results from an extensive comparative exercise between the EU and China’s green taxonomies. This evolving tool is not a legal document but an analysis of approaches, methodologies, and evolving references for interested parties within the scope of the comparison exercise.

The purpose extends beyond the EU and China, intending to improve the comparability and future interoperability of taxonomies worldwide, aiming to reduce transboundary costs of green investments, promote the international mobilisation of green capital, and serve as a methodology for comparing future taxonomies.

The CGT methodology involves the extraction and mapping of climate change mitigation activities from both the China and EU Taxonomies. The activities were evaluated based on scenarios, considering overlaps, differences, and stringency in criteria. The CGT analysed 79 activities across six sectors, offering a detailed breakdown of each.

The IPSF Taxonomy Working Group plans to incorporate more jurisdictions in its comparative analysis, aligning with the G20 Sustainable Finance Working Group’s principles. The release of the CGT signifies a collaborative step towards a globally harmonized approach to sustainable finance, reflecting the commitment of the EU and China to address climate challenges and foster international cooperation.