WHAT IS a Sustainable Taxonomy?
A Sustainable Finance Taxonomy is a classification system that defines activities, assets and/or project categories that contribute to climate, environmental and/or social objectives. A sustainable finance taxonomy can serve as a central instrument to mobilize and direct capital flows towards the investments needed to address the climate crisis.
In practice, taxonomies help prevent greenwashing, i.e. when an organization implements misleading strategies and advertising about its environmental practices. By establishing criteria and indicators that allow assessing whether an activity contributes to sustainability and/or the transition to a sustainable economy, taxonomies clearly indicate what may or may not be an appropriate action for climate investment.
Efforts to implement sustainable taxonomy are taking place globally, and more than 50 countries have already approved or are in the development stage of their Sustainable Taxonomy. The main one, the European Union taxonomy, became law in June 2020. Major economies such as China, South Korea, Russia, and South Africa also already have their taxonomies in use, while the United Kingdom, Australia, India, Canada, and Chile are developing their own documents. In Latin America, Mexico, Colombia, the Dominican Republic, Panama, and Costa Rica have already published their taxonomies.
Why does it matter for your company?
The Brazilian Sustainable Taxonomy (TSB) is a strategic instrument of the Ecological Transformation Plan, coordinated by the Ministry of Finance, which classifies economic activities developed in Brazil according to their climatic, environmental, and social impacts.
Although its initial adoption is voluntary, the TSB will serve as a benchmark for public policies, credit concessions, the issuance of sustainable bonds, and investment decisions in the country.
TSB's three strategic objectives are:
- To mobilize and redirect public and private financing and investments towards economic activities with positive climate, environmental, and social impacts.
- To promote densification and technological concentration geared towards environmental, climatic, social and economic sustainability.
- To create the foundations for the production of reliable information on sustainable finance flows, fostering transparency, integrity, and a long-term vision.
The TSB assesses specific economic activities, not companies as a whole. The Ministry of Finance structured the taxonomy into eight sectoral sections, covering areas ranging from Agriculture and Industry to Energy, Construction, Transportation, and Social Services.
Activities can be classified into two main groups:
Sustainable, low- or zero-carbon activities that contribute directly to climate and environmental goals, such as wind energy generation or native forest regeneration.
Transition activities, which do not yet have fully viable low-carbon alternatives, may be included provided they meet rigorous technical criteria, such as emission limits and the principle of not significantly harming other TSB objectives.
Businesses that do not adhere to the TSB will continue to exist, but will not have access to the direct benefits of sustainable classification, such as easier access to green financing, greater attractiveness to investors and ESG funds, increased transparency and credibility, better competitive positioning in international markets, and regulatory security.
Companies aligned with TSB will also be better positioned to attract resources that foster innovation and competitiveness, especially in sectors such as renewable energy, green infrastructure, and the circular economy.
What does CEBDS say about this?
The Brazilian Sustainable Taxonomy is part of the Sustainable Finance axis of the Ecological Transformation Plan, launched by the Ministry of Finance, and aims to guide investments and policies towards a low-carbon, fair and regenerative economy.
Since 2024, CEBDS has been part of the Advisory Committee of the Brazilian Sustainable Taxonomy (CITSB) and actively participates in its development. During the public consultation phases, CEBDS mobilized its member companies, resulting in 179 contributions, of which 101 were fully or partially incorporated, with the direct engagement of 14 member companies.
This action continues CEBDS's trajectory in sustainable finance, which began in 2016 with the launch of the Green Bonds Guide, positioning the Council as a national reference on the subject.
According to the president of CEBDS, Marina Grossi, participation in the Advisory Committee reinforces the Council's commitment to contributing to a robust and transparent rating system, capable of attracting green investments, accelerating the decarbonization of the country, and promoting social justice.
The TSB will be implemented in two gradual phases and accompanied by a Monitoring, Reporting and Verification (MRV) system, whose portal will be launched within two years of its publication. CEBDS will continue to collaborate to ensure that the TSB remains a living instrument, constantly improving, supporting companies, investors and governments in the transition to a sustainable economy.