Independent Science Based Taxonomy: A New Tool for Sustainable Finance

Posted on July, 11 2024

Categorising sustainable economic activities just became clearer. The Independent Science Based Taxonomy (ISBT) provides businesses, financial institutions and other stakeholders with a free tool that categorises economic activities while ensuring they are entirely backed by climate and environmental science.
Taxonomies of sustainable economic activities provide a science-based language for classifying businesses and investments. With a clear categorisation system, financial institutions can make informed decisions about where to allocate their money, and policymakers can design regulations that incentivise truly sustainable practices.

The movement for sustainable finance taxonomies has been gaining steam globally. More than 60 jurisdictions are currently developing taxonomies, reflecting a consensus on the need for clear standards for sustainable economic activities. However, existing taxonomies may be influenced by political considerations or business lobbies, leading to the inclusion of activities that are not entirely sustainable, or even enabling greenwashing. Examples of that are clearly observed in the EU Taxonomy. One well-known instance is the labelling of gas-fired and nuclear power plants as sustainable, a decision that led WWF, along with other green organisations, to file a case against the European Commission in the European Court of Justice.

The Independent Science Based Taxonomy (ISBT) addresses this challenge by being completely evidence-based and lobby-free. ISBT scores the EU Taxonomy criteria and supplements them with recommendations when they lack a solid scientific basis, based on the technical proposals from the Platform on Sustainable Finance, or on any other science-based criteria in a cascading way. This approach aims to create truly paradigm-shifting criteria that will guide the transition to a sustainable future that benefits both people and the planet.

The initiative is the result of close collaboration among CSOs, academics, and members of the scientific community, as well as other independent stakeholders who work to develop a taxonomy fully based on scientific evidence.

“This independent science-based approach will empower informed decision-making and accelerate the transition to a sustainable future", said Vedran Kordic, EU Taxonomy Coordinator at WWF EU.

For Sonja Haider, Senior Business and Investors Advisor at Chemsec, "in investment decisions towards the sustainable business transition, clarity becomes the cornerstone of progress. By harnessing the collective wisdom of scientists and NGOs, investors can now navigate the multifaceted EU taxonomy criteria, ensuring that every Euro invested is a step towards a more sustainable future".

Mathilde Crepy, Head of Environmental Transparency at ECOS, highlights that "sustainable finance policies need a compass to direct investments towards activities that are proven to benefit the environment. The ISBT - with its focus on science instead of commercial interests - helps to set a high level of environmental ambition that will serve our collective future."

By providing a clear and objective framework, the Independent Science-Based Taxonomy has the potential to be a powerful tool for promoting sustainable finance and building a more resilient future.

ISBT invites all stakeholders to use or join this endeavour. Visit the ISBT call for experts to learn more about the taxonomy, contribute, and engage in the ongoing dialogue. 
The ISBT is an independent project based on publications, scientific literature and investigative journalism produced by a network of exclusively not for profit experts and scientists.