DESIGNING EFFECTIVE SUSTAINABLE FINANCE TAXONOMIES

Sustainable finance taxonomies have emerged as crucial frameworks for directing financial flows towards activities aligned with environmental and social sustainability. These taxonomies serve as classification systems that define criteria for identifying sustainable investments, helping investors, regulators, and issuers assess the degree to which financial assets meet sustainability goals. This article synthesizes insights from the BIS report 'A Taxonomy of Sustainable Finance Taxonomies' and provides a condensed academic-style analysis across six pages. It evaluates the core dimensions of existing taxonomies, identifies key shortcomings, and proposes a set of guiding principles for their improvement. Emphasis is placed on the transition taxonomy model, verification methods, and impact reporting to support climate transition and market transparency. The study concludes with policy actions necessary to enhance credibility, comparability, and efficiency of sustainable finance frameworks worldwide.