COP26: Russia announces new green taxonomy

Russia has announced at the United Nations climate summit, COP26, that is taking place in Glasgow that it has adopted a green taxonomy (see here and here). The new taxonomy is designed to help Russia meet its climate goal of carbon neutrality by 2060 (see here) and fund the green transition.

The Russian taxonomy, which was designed by the Russian state development bank VEB.RF in conjunction with the Climate Bonds Initiative (CBI), is intended to be broadly in line with the taxonomies already published by the CBI and EU. It covers energy, construction, industry, transport, water supply, waste management, biodiversity, and agriculture. However, it does not yet address many of the “do no significant harm” (DNSH) aspects of the EU Taxonomy.

It would appear that the Russian taxonomy has adopted the same science-based criteria for electricity generation that were recommended by the EU Technical Expert Group (TEG) on Sustainable Finance and which is expected to be adopted in the EU taxonomy very soon. The TEG proposed an emissions threshold that effectively excludes coal fired power plants and gas power plants without carbon capture. 

According to CBI chief executive Sean Kidney: 

“The Russian taxonomy's gas-fired power criteria are absolutely in line with the EU Delegated Act, passed by the European Parliament last month…That consistency will make life a lot easier for investors."

VEB first deputy chair Alexey Miroshnichenko is quoted as saying: 

"We believe that Russian market for green projects has the potential to become one of the biggest in the world…The national taxonomy provides a legal framework for international investors to profit from Russia's decarbonisation."

Taxonomies are intended to provide a credible definition for whether certain economic activities are “green” and reduce the risk of “greenwash” (i.e. claiming something is green or environmentally sustainable without being able to back up the claim). They can be a powerful tool for redirecting private capital to lower carbon activities and help companies as well as governments meet their climate goals.

Although the EU taxonomy (and other taxonomies being developed in other countries) do not prevent investors from investing in activities that are not “taxonomy-aligned”, in practice global investors who are themselves on a journey to net zero will be looking to redirect their capital to activities that are lower carbon or net zero. Having taxonomies in different countries or regions that are broadly aligned with each other is bound to make cross-border investment easier and make it more attractive for global investors.

For more information about:

• The EU taxonomy, see our client briefing and blog post: EU Taxonomy Regulation: a detailed analysis and EU Taxonomy update: climate TSC delayed, guidance on Article 8 disclosures and next steps on brown and social taxonomies.
• The UK’s plans for a green taxonomy, see our client briefing Greening Finance: A Roadmap to Sustainable Investing.
• COP26, see our COP26 microsite.