External publications

Implementing sustainability taxonomies to redirect capital flows: the case of South Africa

Hilbrich, Sören / Kathrin Berensmann / Giovanna Artmann / Sam Ashman / Theresa Herbold / Steffen Lötters-Viehof / Agnese Monti / Felix Paffhausen / Stephanie Roigk / Lee-Ann Steenkamp
External Publications (2024)

in: Climate Policy, first published 22.10.2024

DOI: https://doi.org/10.1080/14693062.2024.2415382
Open access

Sustainability taxonomies are comprehensive classification systems that define what constitutes a sustainable economic activity. They aim to increase transparency in financial markets and redirect capital flows to sustainable investments. Such sustainable finance policies can be important levers for the transformation of the economy towards climate neutrality, as today’s investments will shape economic production processes for decades to come. While sustainability taxonomies have been developed in recent years in many countries, existing research on taxonomies has so far often focused on the European Union and has hardly addressed questions of policy implementation. This case study focuses on South Africa’s Green Finance Taxonomy (GFT) and addresses the question of what factors influence the adoption of sustainability taxonomies by potential users. Based on 44 semi-structured expert interviews with taxonomy stakeholders from the private sector, government, civil society and academia, it finds that one year after its publication, the GFT has hardly been used in practice. Important factors hindering an effective implementation are a lack of regulatory embedding, the absence of a legal recognition of the GFT by the European Union (EU), hesitance among financial market participants to build capacity to collect the necessary data, and fossil-fuel path dependencies in South Africa’s economy. Given the difficulties many jurisdictions currently face in implementing their newly developed sustainability taxonomies, these findings have important policy implications not only for South Africa but also for other countries.