Comparison of South Africa’s Green Taxonomy to the EU Taxonomy
11 November 2022 — A comparison study between the EU Green Taxonomy and SA Green Finance Taxonomy has found that SA and EU taxonomies both pursue climate ambition of a net-zero economy to 2050 as a core environmental objective and have a very high degree of similarity between the criteria specified at the level of individual economic activities.
Read the Media Statement by National Treasury.
The study is intended to assist policymakers, companies, and financial market participants in understanding the commonalities and divergences between the EU and the SA taxonomies, to ultimately help foster seamless green financial flows between the EU and South Africa. This is crucial in the context of both the EU and South Africa achieving the net zero goals by 2050.
Scroll down for more information on South Africa’s Green Finance Taxonomy project and a range of new case studies, tools and templates, and 2022 webinar series.
Official Launch of South Africa’s First Green Finance Taxonomy
1 April 2022 — Following a two-year consultation and development process, South Africa’s first national Green Finance Taxonomy was launched by the Taxonomy Working Group, as part of South Africa’s Sustainable Finance Initiative, chaired by National Treasury. The Taxonomy is designed for investors, issuers, lenders and other financial sector participants to track, monitor, and demonstrate the credentials of their green activities in a more confident and efficient way.
Read the Media Statement by National Treasury.
Download the Taxonomy (1 April 2022)
Download supporting documents (March 2022)
- Development Process for the South African Green Finance Taxonomy
- Starting with green and ending with sustainable
- South Africa’s ambitious Green Finance Taxonomy: Why and how South Africa’s ambitious Green Finance Taxonomy is aligned with the EU Sustainable Finance Taxonomy
- Developing a Buildings Taxonomy Entry for South Africa
Definitions
A green finance taxonomy is an official classification or catalogue that defines a minimum set of assets, projects, and sectors that are eligible to be defined as “green” or environmentally friendly. A nationally agreed green finance taxonomy can support emerging national policy and voluntary private sector initiatives toward green finance by reducing costs and uncertainty in classifying a core set of green activities.
A sustainable finance taxonomy is a classification system identifying activities, assets, and/or project categories that deliver on key climate, green, social or sustainable objectives with reference to identified thresholds and/or targets.
About the National Green Finance Taxonomy Project
The Green Finance Taxonomy Project is a workstream under South Africa’s Sustainable Finance Initiative (formerly the Climate Risk Forum), chaired by National Treasury and hosted by the Banking Association South Africa. Development of a national taxonomy was one of the recommendations of National Treasury’s 2021 Technical Paper on “Financing a Sustainable Economy”.
Phase 1
The first phase of work consisted of stakeholder engagement and taxonomy development between June 2020 and March 2022, leading to the launch of the Green Finance Taxonomy in April 2022.
The first phase was led by National Treasury in consultation with the Taxonomy Working Group, with support from IFC, the National Business Initiative (NBI) and Carbon Trust, in partnership with SECO (Swiss State Secretariat for Economic Affairs ) and Sida (Swedish International Development Cooperation Agency)
Phase 2
The second phase of work has focused on embedding the South African Green Finance Taxonomy through direct support to users, awareness raising, and the development of case studies.
The second phase was carried out by the National Business Initiative (NBI) and Carbon Trust and supported by the South Africa-UK PACT (Partnering for Accelerated Climate Transitions) programme, jointly governed and funded by the UK Government’s Foreign, Commonwealth and Development Office (FCDO) and the Department for Business, Energy and Industrial Strategy (BEIS) through the UK’s International Climate Finance.
Scroll down for more information and additional Project Resources.
Case Studies
From November 2021 to June 2022, the Carbon Trust and NBI undertook detailed pilot projects with 6 volunteer participants. The participants were from various backgrounds, reflecting a sample of key stakeholders in the South African investment landscape.
The 6 pilots undertaken by the team culminated in 4 thematic case studies. These case studies add to the body of knowledge regarding the taxonomy.
| WHAT? | WHO? | WHY? | |
| 1. | Embedding the GFT into Public Sector Procurement Processes | Local municipalities; public sector entities; government departments | To drive change at a local scale and embed sustainability into City planning |
| 2. | Embedding the GFT into Asset Management Investment Decision-Making | Asset managers; private equity investors; fund managers; venture capitalists; securities exchanges; listed companies; financial instrument issuers | To stimulate an ecosystem of investable GFT aligned projects and attract finance |
| 3. | Embedding the GFT into Sustainable Finance Frameworks | Commercial banks; industry; market exchanges; debt investors; municipalities | To standardise green debt issuance |
| 4. | Opportunities for Emerging Market Development Banks | Development banks; international funders; emerging market governments | To align with international best practice |
Disclaimer: case studies are based on experiences of individual organisations through limited applications and recommendations are based on general insights. The piloting process, case study, tools, and development of templates are part of the broader South Africa-UK PACT project overseen by National Treasury; however, these case studies, tools and templates are not endorsed by National Treasury, nor do they express the views of National Treasury.
Tools and Templates
Through the process of piloting the GFT across various organisations, several tools and templates were developed to support accessibility. The below graphic illustrates the application of the various tools and templates to the needs identified by pilot participants.
Tools & Templates
- Climate Budget Tagging (CBT) tool and SA GFT Mapping
- Sample project assessment and due diligence documents
- GFT Process flow for extra-jurisdictional investments
- GFT Eligibility Assessment and Reporting Template
- Train-the-Trainer Slide Deck
GFT Alignment Checklists
- GFT Checklist — BLANK
- GFT Checklist — Acquisition and ownership
- GFT Checklist — Data processing and hosting
- GFT Checklist — Hydropower
- GFT Checklist — Infrastructure for low-carbon transport
- GFT Checklist — Road, rail and freight
- GFT Checklist — Solar, Wind and Ocean
- GFT Checklist — Waste
Useful references on the functions of taxonomies
- ASEAN Taxonomy for Sustainable Finance Version 1, ASEAN Taxonomy Board, 2021
- Common Ground Taxonomy – Climate Change Mitigation Instruction Report, International Platform on sustainable Finance, 2021
- “Do No Significant Harm” and “Minimum Safeguards” in Practice, FTSE Russell, 2021
- Ensuring the usability of the EU Taxonomy, International Capital Market Association (ICMA), 2022
- Practical Approaches to Applying the EU Taxonomy to Bank Lending, EBF and UNEP, 2022
- Taxonomy: Final report of the Technical Expert Group on Sustainable Finance, EU Technical Expert Group on Sustainable Finance, 2020
- Testing the application of the EU Taxonomy to core banking products: High level recommendations, EBF and UNEP, 2021
- Usability Guide EU Green Bond Standard, EU Technical Expert Group on Sustainable Finance, 2020
2022 Webinar series: Driving Uptake
A series of webinars was held to share insights from a diverse set of speakers and panellists on national sustainability and financial reporting and launch a set of knowledge products and tools on how to deepen GFT implementation and integration at a macro-scale.
The webinars can be accessed in the links below:
9 September 2022 — Panel Discussion on International Taxonomy Trends and Lessons for South Africa [Passcode: NBI@9SEP2022]
16 September 2022 — The GFT and ESG Disclosure [Passcode: NBI@16SEP2022]
30 September 2022 — Developing and Applying the GFT [Passcode: NBI@30Sept2022]
Stakeholder Consultation Process
The Taxonomy Working Group, chaired by National Treasury, concluded an extensive consultation process from June 2020 to February 2022 to develop a National Green Finance Taxonomy.
The following stakeholder consultation webinars were held in October and November 2020 to get stakeholder input from different user groups to inform the development of a Green Finance Taxonomy for South Africa.
- 12 October 2020 — Policy Makers and Government Agencies
- 13 October 2020 — Collaboration Engagements
- 16 October 2020 — Financial Market Practitioners
- 19 October 2020 — Land-Use and Biodiversity Sector
- 21 October 2020 — Multilateral Development Institutions
- 6 November 2020 — Companies and Project Developers
Draft documents were published in June 2021 for public comment until 14 July 2021.
Consultation documents are still available via the following links.
- Draft Green Finance Taxonomy (June 2021)
- Draft User Guidance Summary Presentation (June 2021)
- Draft Green Finance Taxonomy User Guidance (June 2021)
- Listing of developmental aspects (June 2021)
Read the full Call for Stakeholder Inputs.
In addition, the draft taxonomy was tested by a number of local banks, asset managers, and pension funds to understand the practical implications of implementation.
More about the Taxonomy Working Group
A Steering Committee and Working Groups were established to support the implementation of the Technical Paper recommendations. These include a Taxonomy Working Group chaired by National Treasury and including representatives from
- South Africa’s Department of Forestry, Fisheries and the Environment (DFFE)
- Department of Monitoring and Evaluation (DPME)
- The Financial Sector Conduct Authority (FSCA)
- The Prudential Authority (PA)
- The Johannesburg Stock Exchange (JSE)
- The Banking Association South Africa (BASA)
- Batseta (Council of Retirement Funds for South Africa)
- The Association for Savings and Investment South Africa (ASISA)
- Representatives from banks and retirement funds.
The purpose of the Working Group is to develop and evolve a taxonomy for green, social and sustainable finance initiatives for the South Africa financial services industry, as recommended by National Treasury’s Financing a Sustainable Economy Technical Paper (2020).
Priority Areas of Focus
The focus has been to develop a taxonomy to take the first critical steps towards ensuring that economic activities are green, and positions South Africa as a resilient, competitive and low carbon economy and society. The taxonomy should not seek to solve all problems for all stakeholders.
The immediate practical priorities and focus areas for the South African financial sector include risks and challenges posed by climate change and the role of the financial sector to respond to these. As such, the initial focus is on a green taxonomy, which provides a manageable starting point.
International taxonomies were reviewed and the structure, principles, activities, and thresholds adapted where applicable. In addition, potentially uniquely South African economic activities were considered, such as economic activity that addresses social and vulnerable transitions, transition projects, and South African specific development concerns relevant for adaptation and resilience investment needs. Climate change risk and finance opportunities were included in the initial scope of a Green Taxonomy.
Objectives
1. Establish Taxonomy
Establish the ‘Version 1’ taxonomy as a platform upon which to build, having defined currently accepted definitions and guiding principles for classifying assets and projects as “green”. This will broadly include, but not be limited to, providing technical review and guidance on the development of
- Definitions and principles
- Thematic areas
- Screening criteria for economic activities for inclusion/exclusion and methodologies applied for developing technical screening criteria
- Differentiating dimensions for economic activities
- Integrating local context technical criteria
2. Governance
Provide inputs on a process for future adaptation, iteration and refinement of the taxonomy, supplements, and principles. This it to allow the taxonomy to easily evolve for social and sustainable finance and the inclusion or exclusion of future economic activities or investment contexts that haven’t to date been considered.
3. Recommendations
Provide recommendations on how to ensure that the taxonomy has a clear custodian who is to maintain and continue the evolution of the taxonomy.
Project Resources
Kick-off webinar, 9 July 2020 – Green Recovery: Stimulating Post-COVID Economic Competitiveness in South Africa
Project briefing report, 8 October 2020 – Developing a National Green Finance Taxonomy
Version Zero Stakeholder Workshops slide-deck, October 2020 – South African Green Finance Taxonomy
Stakeholder Presentations, October and November 2020
12 October 2020
- National Climate Change Adaptation Strategy – Alinah Mthembu, Climate Change Adaptation-Natural Resources, Department of Environment, Forestry & Fisheries (DEFF)
- Overview of the Energy RDI Programme/Strategy to leverage funds for demonstration – Dr Rebecca Maserumule
- Introduction to the National Climate Change Information System (NCCIS) – Department of Department of Environment, Forestry & Fisheries (DEFF)
- Green industrial development and the benefits of a taxonomy – Muhammed Patel, Gaylor Montmasson-Clair, Trade & Industrial Policy Strategies (TIPS)
- Climate Bonds Initiative Input into the NBI workshop Green Finance Taxonomy for South Africa – Bridget Boulle & Sean Kidney, Climate Bonds Initiative
- City of Tshwane Climate Action Plan – Sello Mphaga Divisional Head: City Sustainability
16 October 2020
- The JSE view on the use case for a Green Finance Taxonomy – Shameela Soobramoney (Chief Sustainability Officer), JSE
- Example of an internal Green Economy Taxonomy, 16 October – Waleed Hendricks, Old Mutual Investment Group
- Developing a National Green Finance Taxonomy Stakeholder Engagement – Sunette Mulder, Association for Savings and Investment South Africa (ASISA)
19 October 2020
- Stakeholder Consultation: Green Taxonomy, 19 October 2020 – Nehru Pillay, Land Bank
21 October 2020
- How the AFDB Finances Climate Change and Green Growth – Musole M. Musumali, Climate Change and Green Growth Officer, Climate Change and Green Growth Department
- Green Bonds Work Green Economy Transformation Project (GET) South Africa Global IKI Project Green Economy Transformation in cooperation with PAGE – Nondumiso Dumakude, GIZ
6 November 2020
- Built Environment Development of Green Finance Taxonomy for South Africa, 6 November – Lisa Reynolds, Green Building Council South Africa
- PPC Climate Projects, 6 November – Tshilidzi Ligaraba, PPC Ltd.