Overview:
Presenting the Union Budget for 2024-25, Finance Minister announced that the government would develop‘climate finance taxonomy’.
About Climate Finance Taxonomy:
- It is a system that classifies which parts of the economy may be marketed as sustainable investments.
- It helps guide investors and banks in directing trillions toward impactful investments to tackle climate change.
- Taxonomies are frequently used to set standards for classifying climate-related financial instruments (e.g., green bonds), but, increasingly, they serve other use cases where the benchmarking feature is viewed as beneficial, including in the areas of climate risk management, net-zero transition planning, and climate disclosure.
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- South Africa, Colombia, South Korea, Thailand, Singapore, Canada, and Mexico are some of the countries which have developed taxonomies. The European Union has done this as well.
- Significance
- With global temperatures soaring, and the adverse effects of climate change exacerbating, countries need to transition to a net-zero economy — the balance between the amount of greenhouse gas (GHG) that is produced, and the amount that is removed from the atmosphere.
- It can play a pivotal role in doing this as they can help ascertain if economic activities are aligned with credible, science-based transition pathways.
- They can also give impetus to deployment of climate capital, and reduce the risks of greenwashing.
- It will enhance the availability of capital for climate adaptation and mitigation. This will help India achieve its climate commitments and green transition.
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Q1: What are Sustainable Development Goals (SDGs)?
They recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.
NOTE – This article was originally published in vajiramandravi and can be viewed here
