This section contains information that will support raising the awareness of both financial market participants and the general public about sustainable finance.

What is a sustainable finance taxonomy and why is it needed?

Currently, there is no universally agreed definition of "sustainable investment". This, in turn, leads to the existence of different definitions of sustainable finance and thus the fragmentation of initiatives by public and private enterprises in sustainable investments.

The lack of consensus on sustainable finance definition creates reliability and comparability issue for sustainable financial investments and also may result in "green imitation". Determining a "common language" through sustainable finance taxonomy and instruments will allow, in addition to solving the abovementioned problems and also to ensure transparency in sustainable financial markets and direct financial flows toward sustainable development goals.

In this regard, the development of sustainable finance taxonomy has been started by several countries. Taxonomy is unified classification system that defines sustainable economic activity. Taxonomies allow to assess the extent to which investments meet the sustainability criteria by defining quantitative and qualitative criteria for economic activity. Taxonomies are developed by involving relevant public and private sector participants.

The taxonomy serves to support the realization of economic and social indicators, including international and national climate/environmental goals. In international practice, taxonomies have various functions:

• The realization of sustainable/green strategic priorities of the country;

• The selection of environmental projects to be invested by financial market participants;

• To direct financial resources to the climate change mitigation and adaptation, as well as to the solution of other environmental problems;

• To make the disclosure of information on sustainable financial risks and opportunities comparable and reliable;

• To direct public investments to sustainable/green goals;

• To prevent "green imitation".

In addition to the above, the taxonomy also defines a "common language" on sustainable finance for stakeholders.

There has been high interest in the development of a sustainable finance taxonomy by various countries. Taxonomies have been developed by a number of developed and developing countries (China, Colombia, Georgia, Mongolia, Indonesia, Sri Lanka, South Africa, etc.) and are being developed by other countries as well. In addition, two regional taxonomies have been developed by the European Union and Southeast Asian countries.