Brazil’s draft Sustainable Taxonomy Action Plan (the Action Plan), prepared by the Ministry of Finance, received contributions as part of a public consultation. The development of a sustainable taxonomy seeks to address Brazil’s main environmental and social challenges, considering its commitments, objectives, and priority plans.
Consisting of a classification system that defines, on a scientific basis, activities, assets, and/or categories of projects that contribute to climate, environmental, and/or social objectives, taxonomies provide a common terminology for companies, financial institutions, and investors to manage investment decisions, as well as for regulators, governments, and other stakeholders to develop public policies. Also, they are essential for increasing transparency of information on sustainable economic and financial activities.
According to the International Capital Market Association (ICMA), they provide specific criteria and indicators that make it possible to assess whether an activity contributes to sustainability and/or the transition to a sustainable economy. The Action Plan addresses several topics: discusses the landscape of sustainable finance in the world, with a focus on international commitments; lists domestic and international taxonomy initiatives; explains the strategic, environmental, and social objectives intended for the Brazilian taxonomy; presents the international commitments and national legislation linked to the taxonomy; and highlights the design of the taxonomy by explaining how its objectives are articulated and which principles and definitions are used for its construction.
The Action Plan is particularly important to the private sector, as it includes, among other objectives, climate change mitigation and adaptation. The consultation was to help shape the guidelines that are expected to steer investments and policies in Brazil going forward, to influence the regulations, and to better understand sustainability criteria. In addition, for companies, alignment with the taxonomy creates the potential to attract investments, improve market competitiveness, reduce legal risks, and enhance sustainable transparency practices.
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