On 1 April 2022, the National Treasury (NT) launched South Africa’s first Green Finance Taxonomy (GFT) (see here and here). 

This is an official classification that defines a minimum set of assets, projects, and sectors as eligible to be defined as “green” or environmentally friendly. The taxonomy also lists the standards that define economic activities as “green”. 

The GFT has been developed off the back of National Treasury’s 2020 technical paper on “Financing a Sustainable Economy”, aimed at unlocking access to sustainable finance and stimulating the allocation of capital to support a development-focused and climate-resilient economy.

It focuses initially on climate change but is expected to be extended in due course to other issues such as biodiversity and land use.

The GFT is geared to the priorities, contexts and needs of South Africa while remaining aligned with international best practice, and has therefore taken into account the EU model. As with the EU taxonomy, the aim is to help investors and financial institutions make more informed decisions about “green” projects.

The development of the taxonomy has been overseen by a multi-stakeholder working group drawing from national government, financial sector regulators and the financial services sector. National Treasury has advised that the GFT is intended to be a living document, to be updated and expanded over time through a governance process. A separate working group comprising regulatory authorities such as the Prudential Authority and Financial Sector Conduct Authority will provide oversight and governance to this process, and will inform the development of future regulatory instruments in line with international developments.

For more information about the GFT, see the following article written by my colleagues Patrick Heron and Joon Chong at Webber Wentzel: National Treasury launches the Green Finance Taxonomy Paper.