EU pulls out of global taxonomy project backed by China and Singapore

Key Points

• The European Commission has stepped back from the joint global taxonomy initiative, citing limited evidence of practical demand and significant resource requirements.
• The decision marks a retreat from efforts to improve interoperability between green taxonomies across major markets, after the EU, China and Singapore had worked together to identify common ground between their respective classification systems.
• China and Singapore are continuing to pursue greater alignment, raising questions over whether the EU is stepping back from international green-finance cooperation just as other jurisdictions seek to expand it.

The commission has stepped back from the next phase of the common ground taxonomy (CGT) and multi-jurisdiction common ground taxonomy (M-CGT) exercises, which it originally jointly launched with China and Singapore.

The commission came to the decision after it “identified limited evidence of practical demand and uptake from an EU market perspective, as well as significant resource implications associated with extending the exercise,” a spokesperson told Green Central Banking.

“It was also important to preserve clarity regarding the distinct legal and technical features of the EU Taxonomy,” the spokesperson added, stressing that the CGT and M-CGT exercises “do not establish a common taxonomy, regulatory equivalence or mutual recognition between the underlying frameworks.”

The commission, however, remains “fully engaged” in the International Platform on Sustainable Finance (IPSF), which it chairs, and the taxonomy working group it co-chairs with China, the spokesperson said.

“International comparability is being advanced through carefully scoped analytical cooperation, including the taxonomy stock-taking exercise currently being conducted by the IPSF taxonomy working group.”

The IPSF, which currently includes 22 members, commenced work on the EU-China CGT in 2020 to enhance the interoperability between China and the EU’s taxonomies.

As of 2024, the CGT recognises 76 overlapping climate mitigation activities and 20 activities contributing to other environmental objectives shared by both jurisdictions. M-CGT expanded the scope of this mapping exercise to include the Singapore-Asia Taxonomy in 2024, which identified 110 common activities.

The Monetary Authority of Singapore (MAS) and the People’s Bank of China declined to comment on how the latest developments would impact work on the multilateral taxonomy project.

Muted uptake of M-CGT

Ma Jun, co-chair of the IPSF taxonomy working group, previously expressed hope for larger economies, like Brazil and Indonesia, to join the M-CGT down the line so that it can “become a globally accepted benchmark for taxonomy development.”

When the M-CGT was launched, Gillian Tan, then-chief sustainability officer of the MAS, called it “an important milestone” which “serves as a common baseline that market participants can refer to in defining green activities, enabling cross border financing in the markets that the respective taxonomies serve.”

But the commission spokesperson told Green Central Banking that “no further expansion of the M-CGT is being pursued at this stage,” following an assessment of its practical use cases and market uptake.

While the use of CGT has taken off in China, where a total of 592 CGT-aligned Chinese green bonds worth over 384.2bn yuan (US$57bn) have been issued to date, the uptake has been relatively muted for M-CGT, which was launched in 2024.

Last August, the first batch of M-CGT-aligned green bonds were listed in the Singapore Exchange, including a dual-currency offering by the state-owned Industrial and Commercial Bank of China’s Singapore branch totalling 3.5bn yuan and S$350m as well as a 1.5bn yuan green bond issued by the leasing arm of Shenzhen-headquartered China Merchants Bank.

However, no further M-CGT-aligned issuances have been made since.

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