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This section analyzes the initiatives known as taxonomies, which are classification systems applicable to various sectors initiated by countries or other public or private institutions:

• Climate Bonds Taxonomy
• European Union (EU) Taxonomy
• Colombian Green Taxonomy (TVC)
• Mexican Sustainable Taxonomy

Table 1 presents a comparison of their stated objectives with those envisaged for the Brazilian Sustainable Taxonomy. Table 2 provides additional information on these taxonomies, focusing on the criteria applicable to land use activities.^[1]

Table 1. Objectives of the Analyzed Taxonomies

Source: CPI/PUC-Rio with data from MF (2023a); CBI (2023a); EU Regulation no. 2020/852; Gobierno de Colombia (2022); SHCP (2023), and FEBRABAN (2021), 2024

Table 2. Scope of the Land Use Criteria of the Analyzed Taxonomies

Source: CPI/PUC-Rio with data from MF (2023a); CBI (2023a); EU Regulation no. 2020/852; Gobierno de Colombia (2022); SHCP (2023), and FEBRABAN (2021), 2024

International Taxonomies

Climate Bonds Taxonomy

The Climate Bonds Taxonomy was initially launched in 2013, with the aim of guiding market agents to identify projects and assets that promote investments in line with the objective of limiting the increase in global temperature to 1.5°C above pre-industrial levels in accordance with the Paris Agreement. Grouping together sectors that are crucial to decarbonizing the economy, the Climate Bonds Taxonomy establishes sectoral criteria with specific limits, metrics and good practices that define an investment’s eligibility for financing certified by the Climate Bonds Standard.^[2] These criteria, which are fundamental for certification, outline quantitative and qualitative indicators related to climate mitigation, adaptation and resilience that the issuance of the instrument must meet (CBI 2021). The Climate Bonds Standard currently offers two types of certification (CBI 2023a):

Level 1 – Aligned: non-financial corporate entities, Use of Proceeds (UoPs) debt instruments^[3] or assets that are aligned with the 1.5°C warming limit established in the Paris Agreement.

Level 2 – Transition: non-financial corporate entities or Sustainability-linked Debt Instruments (SLDs) whose transition plans foresee them being aligned with the 1.5°C trajectory by 2030.

Thus, an agriculture or forestry asset or project becomes eligible for the Climate Bonds Standard when all applicable sectoral and CBI standard criteria are met. It should be noted that an external assessment by an independent verifier is required to assess the alignment of the asset or project with the CBI standard.

CBI and MAPA Partnership

In 2022, CBI published the report “Brazilian Agricultural Plan: alignment of sustainability parameters and allocation of credit line resources to the Climate Bonds Initiative Taxonomy” (CBI 2022). The aim of the report was to analyze the volume of resources contracted in the 2020/2021 harvest for some rural credit lines and their alignment with the Climate Bonds Taxonomy.^[4]

In the report, CBI informs that the selection of the lines analyzed (sub-programs) was based on the work of the Environmentally Sustainable Productive Systems (SPAs), prepared by MAPA—analyzed in this document below. In addition, CBI presents a comparison between the eligibility criteria for access to rural credit and the Climate Bonds Taxonomy. For this analysis, the organization adopted a “traffic light system” with four categories that classify the level of alignment of credit lines with the Climate Bonds Taxonomy, as shown in Table 3 below. However, this analysis was used for information purposes only and was not included in the quantitative exercise published by CBI.

Table 3. Categories of Alignment of Rural Credit Lines with the Climate Bonds Taxonomy

Source: CPI/PUC-Rio adapted from CBI (2022), 2024

Of the 21 rural credit sub-programs analyzed, 15 were identified as being aligned with the Climate Bonds Taxonomy and agriculture and forestry criteria at the activity level (allocation of resources), while six are partially aligned. The sub-programs considered in CBI analysis can be found in Table 10.

It is important to note that, regardless of the level of alignment of the lines analyzed, a producer who obtains financing through these rural credit lines is not automatically eligible for CBI certification. Furthermore, the alignment of the sustainability parameters of the rural credit lines does not replace the external evaluation process. In order to raise funds according to the CBI criteria, an external assessment by an independent verifier is required, which can take the form of a second-party opinion (an independent expert confirming eligibility) or in the form of CBI certification (through a guarantee given by an external verifier, approved by the organization, which confirms alignment with the Climate Bonds Standard).

Criteria for Agricultural Activities

The crop and cattle sectors are covered by the Climate Bonds Taxonomy.^[5] The criteria for agriculture established in 2020 apply to crop production (perennial and non-perennial crops, including agroforestry systems where plantations account for more than 50% of the area), cattle production and mixed production (crops and cattle).^[6]

Crop production in controlled environments (protected crop), aquaculture and fish farming and the supply chain are outside the scope of the crop criteria. In addition, crop projects and assets covering other sectors, such as forestry, bioenergy, water resources, infrastructure, transportation, renewable energy and solid waste, must also meet the requirements of the respective sector criteria. For example, for Crop-Cattle-Forest Integration (CCFI) projects, compliance with both the crop and forestry criteria will be required.

The criteria for agriculture apply to projects and assets in production units—an entire unit, or a component, or a specific intervention in the unit—as well as non-production units. The most common production unit is the farm. Non-production units refer to support activities outside the unit with the aim of (i) reducing GHG emissions/increasing carbon sequestration, or (ii) improving adaptation and resilience.^[7]

For each type of production and use of resources, criteria are determined that can be applied and assessed in the components of (i) mitigation and (ii) adaptation and resilience.

The mitigation component contains the following eligibility criteria:

• No conversion of land with a high carbon stock.
• No clearing of woody vegetation over three meters in height after 2020.
• Percentage reduction in GHG emissions during the investment period compared to the beginning of the period.
• Proof that the unit adopts Best practices for low emissions agriculture.

• Fertilizer use management plan
• Soil management for net carbon sequestration
• Biomass management for net carbon sequestration
• Energy (efficiency and use of renewables)
• Residue management
• Prevent food loss
• Reduced flooding time (in the case of irrigated rice)
• Peatland restoration (a type of soil)
• Manure management
• Animal management

• If the unit includes livestock in intensive production systems, animal welfare criteria will be included, as well as the purchase of feed from sustainable sources and from areas that have not been recently converted from natural habitats.

In relation to the adaptation and resilience compliance requirements, the criteria of a checklist consisting of the following activities must be met:

Identification of clear boundaries and critical interdependencies between the farm and/or intervention and the system in which it operates.

• Assessment of the main physical climate risks to which the production unit or intervention will be exposed and vulnerable throughout its useful life.
• The measures that have been or will be taken to deal with these risks are capable of mitigating them so that the production unit(s) are suitable for climate change throughout their useful life.
• The measures that have been or will be taken do not undermine the resilience of the system in which they operate, as indicated by the boundaries and critical interdependencies with that system.
• Continuous monitoring and evaluation of the relevance of resilience and risk containment measures and that adjustments related to such measures will be made as necessary.

Criteria for Forestry

The CBI’s forestry criteria, established in 2018, apply to assets and projects related to plantation forestry, sustainable forest management, the production of Non-Timber Forest Products (NTFPs), forest restoration and conservation, and conservation and restoration of non-forested lands.^[8]

To ensure compliance with the forestry criteria, it is crucial that projects and assets with overlaps to different sectors are assessed against the specific criteria. For example, forest restoration for watershed management must meet the water criteria, while vehicles and vessels within forest concessions are covered by the forest criteria themselves. Agroforestry, palm oil production and integrated cattle and forest activities must follow the agriculture criteria, while bioenergy facilities or plants must comply with the bioenergy criteria. Finally, the generation of raw materials for bioenergy derived from wood and planted forests intended for bioenergy must comply with the forestry criteria (CBI 2018).

For each type of forest and use of resources, certain criteria are applied and evaluated in the components of (i) mitigation, (ii) adaptation and resilience, and (iii) Free, Prior and Informed Consent (FPIC).^[9] The requirements to comply with the components vary depending on the project and type of forestry activity practiced. In addition, the CBI specifies requirements and evidence that must be provided to prove compliance assessment (CBI ndb).

The mitigation component contains the following eligibility criteria:^[10]

• No conversion of natural landscape.
• Carbon stocks of forests or other habitats must be maintained through good management practices.

Regarding adaptation and resilience compliance requirements, all types of projects and assets must meet the requirements of the adaptation and resilience checklist:

• Verify, understand and mitigate the impacts that climate change can have on the resilience of the adjacent forest, land or ecosystem.
• Maintain the general condition of forests (forest health) or other habitats through good management practices.

With the aim of promoting equity and inclusion in access to markets and recognizing the financial limitations of small producers in obtaining external certification, the CBI accepts adaptations to the requirements of the criteria for proving compliance in these cases. The definition of smallholders and the requirements for this profile for each type of forest are available in the sector criteria for forests (CBI 2018).

In 2024, CBI will publish new sectoral criteria for deforestation and conversion free sourcing. These criteria establish cut-off dates for linked products from deforested areas in global chains and guidelines for traceability, in line with recent policy regulations aimed at the EU market.^[11] These criteria prioritize climate and biodiversity, but also address just transition and social issues such as human and indigenous rights. These criteria will be applied to companies operating in the food production chain and obtaining agricultural commodities from land use, as well as to entities, Use of Proceeds or Sustainability-Linked Debt instruments, which aim to obtain products free from deforestation and the conversion of natural ecosystems (CBI nda).

European Union (EU) Taxonomy

The EU Taxonomy is the regulation that establishes the framework for promoting sustainable investment in its member countries, based on a set of rules that determine whether an economic activity is environmentally sustainable (EU Regulation 2020/852). The taxonomy identifies sectors and activities that are relevant to decarbonization, given their substantial contribution to climate change mitigation and other broader environmental objectives. This regime is applied to the entire financial system of the bloc, including for policymaking and regulation in the banking sector, asset management, pension funds, and other financial services (Jena and Purkayastha 2020). The regulation came into force in 2020 after a long negotiation process (Ricas and Baccas 2021).

The EU Taxonomy defines sustainable investment as investment made in accordance with the principles of the regulation for economic activities aligned with climate and environmental objectives, as shown in Table 1:

• Climate change mitigation
• Climate change adaptation
• Sustainable use and protection of water and marine resources
• Transition to a circular economy
• Pollution prevention and control
• Protecting and restoration of biodiversity and ecosystems

Compliance with the EU Taxonomy occurs if the economic activity:

• Makes a substantial contribution to at least one of the objectives;
• Does not significantly harm (DNSH) the other objectives;
• Meets the minimum safeguards set out in the regulations; and^[12]
• Meets the technical screening criteria established by the European Commission in delegated acts.^[13]

To ensure that an economic activity contributes substantially to the objectives of the taxonomy, without significantly harming any of the other objectives, the EU establishes performance criteria, the so-called “technical screening criteria”, in delegated acts, which complement the guidelines established by the taxonomy. Initially, criteria were developed only for certain economic sectors, from a non-exhaustive list of economic activities that contribute to mitigation and adaptation objectives.^[14]

New criteria have recently been published for some activities that contribute to some of the taxonomy’s other environmental objectives (EU Delegated Regulation no. 2023/2486). For the land use sectors, only the forestry sector and activities linked to “environmental protection and restoration”^[15] have specific technical screening criteria already regulated—detailed in Table 10. As for crops and cattle, no criteria have yet been established.^[16]

For each economic activity, the EU Taxonomy describes the assessed activity in detail, defines the criteria for determining its substantial contribution to one or more of the taxonomy’s objectives, as well as criteria for not causing significant harm (DNSH) to other objectives. In addition, minimum safeguards are defined to avoid social or environmental damage, including compliance with labor regulations and respect for human rights.

The EU Taxonomy is part of a regulatory framework that complements other regulations for reporting and monitoring financial flows. In terms of usability, the European regulation establishes a common language, standardizes and determines transparency rules, as well as imposing obligations on the main players in the market (Green Finance Platform 2021):

• EU member states should apply the taxonomy when regulating how financial products and corporate bonds are made available as environmentally sustainable.
• Market participants offering financial products must report the alignment of their products with the taxonomy.
• Large companies obliged to disclose non-financial statements must inform how their economic activities align with the taxonomy (Comissão Europeia 2021b).^[17]

To inform and support investors in making sustainable investment decisions, transparency standards for financial and non-financial institutions have been established by additional regulations to the taxonomy (Comissão Europeia 2021b), such as:

• European Sustainability Reporting Standards (ESRS) and Corporate Sustainability Reporting Directive (CSRD): reporting rules for large companies and publicly traded companies on the impact of their business on climate and social issues and the risk of climate change to their operations (Deloitte 2023). Mandatory rule from July 2024.
• Sustainable Finance Disclosure Regulation (SFDR): governs sustainability labeling for financial products and services marketed in the EU and sets the standard for demonstrating their alignment with the taxonomy (Mayer and Beaser 2023). The regulation was implemented in mid-2021.

Criteria for Forestry

For the forestry sector, the technical criteria establish whether an economic activity contributes substantially to mitigating or adapting to climate change without jeopardizing other environmental objectives, making it an enabling activity for climate adaptation.^[18] The forestry economic activities regulated by the European Union Taxonomy are rehabilitation and restoration of forests, including reforestation and natural forest regeneration after an extreme event, forest management and conservation forestry.^[19]

To mitigate climate change, the technical screening criteria for forestry economic activities are made up of the following elements:^[20]

• Reforestation plan, forest management plan or equivalent instrument: contains detailed information about the area, management objectives, strategies, preservation measures, social considerations and assessment of associated risks. In addition, it is crucial to ensure that the activity does not cause degradation in areas with a high carbon content and that it complies with all environmental and legal regulations. Monitoring measures are necessary to ensure the accuracy of the information contained in the forest management plan.
• Climate benefit analysis: for forest areas that meet the carbon conservation requirements, the activity must show that its GHG emissions are lower than a reference value over 30 years and demonstrate long-term climate benefits.^[21] For areas that do not meet these requirements, it is necessary to demonstrate that emissions over 30 years are lower than a reference value and that, in the long term, emissions are lower than the reference scenario. The analysis must follow the guidelines of the Intergovernmental Panel on Climate Change (IPCC).^[22]
• Guarantee of permanence: based on European legislation which states that the area must be classified as a permanent forest estate, as defined by the Food and Agriculture Organization of the United Nations (FAO), or as a protected area or through a legal or contractual guarantee of forest conservation.^[23]
• Audit: verification of compliance must be carried out every two years after the start of the activity and every ten years thereafter. Compliance is verified by competent authorities or independent certifiers.^[24]
• Group assessment: compliance can be assessed at the level of the area of forest origin or in a group of homogeneous companies.
• DNSH criteria: establishes criteria to ensure that the activity does not cause significant environmental damage to the different categories of objectives: adaptation to climate change, sustainable use of water, circular economy, pollution prevention, and protection of biodiversity. For example, the activity complies with applicable regulations, contributes to reducing the use of pesticides and fertilizers, has the objectives of conservation and increase of biodiversity and promotes biodiversity-friendly practices, among others.

In order to adapt to climate change, the technical screening criteria for forestry economic activities are made up of the following elements:^[25]

• Adoption of adaptation solutions: implementing solutions to reduce the physical risks associated with climate. Adaptation solutions are the set of all measures, actions, adjustments, changes, applications, products, services, etc. that contribute to adapting to climate change (EU Technical Expert Group on Sustainable Finance 2020).
• Identifying and assessing climate risks: identify climate risks relevant to economic activity.^[26] Assess climate vulnerability and risks, considering the scale and life expectancy of the activity and based on climate projections.
• Scientific basis and methodologies: climate projections and impact assessments must be based on good practice and up-to-date scientific knowledge, such as the IPCC.
• Guidelines for adaptation: the adaptation solutions adopted do not negatively affect the adaptation efforts of other people or activities. They promote nature-based solutions, are consistent with local, sectoral, regional or national adaptation plans and strategies, are monitored and evaluated on the basis of predefined indicators, and corrective measures are considered in the event of failure to meet targets.
• Enabling activity: demonstrates through assessment of present and future climate risks that the activity contributes to increasing the resilience or adaptation efforts of other people or economic activities.
• DNSH criteria: establishes criteria to ensure that the activity does not cause significant environmental damage to the different categories of objectives: climate change mitigation, sustainable water use, circular economy, pollution prevention, and biodiversity protection. For example , the activity complies with applicable regulations, contributes to reducing the use of pesticides and fertilizers, adopts measures to prevent water and soil pollution, has objectives to conserve and increase biodiversity, promotes practices that are favorable to biodiversity, among others.

Criteria for Environmental Protection and Restoration Activities

In addition to the forestry sector, the European Union Taxonomy has specific technical criteria for another sector related to land use within the scope of the European regulation: environmental protection and restoration activities.^[27] Although with a smaller number of economic activities, criteria are available for substantial contribution to mitigation, adaptation and the protection and restoration of biodiversity and ecosystems, with wetland restoration being the economic activity covered for mitigation and adaptation.^[28] For biodiversity criteria, the activity covered is conservation, including restoration of habitats, ecosystems and species.^[29]

To mitigate climate change, the technical screening criteria for economic activities to restore wetlands are made up of the following elements:

• Restoration plan: contains detailed information for the recovery and management of wetlands based on the guidelines of the Ramsar Convention and takes into account local hydrological and soil conditions. Monitoring measures are necessary to ensure the accuracy of the information contained in the plan.
• Climate benefit analysis: demonstrating a net balance of GHG emissions lower than the reference values over 30 years. In addition, the calculation of climate benefits follows up-to-date guidelines, considering accurate and complete information, covering all affected carbon pools and associated risks. The analysis also includes projections for coastal wetlands and takes into account normal practices and natural disturbances, as long as they are consistent with the established guidelines.
• Guarantee of permanence: based on European legislation, which states that the area must be designated (i) for conservation as a wetland, so that its land use cannot be changed, (ii) as a protected area or (iii) through a legal or contractual guarantee of wetland conservation.^[30]
• Audit: verification of compliance must be carried out every two years after the start of the activity and every ten years thereafter. Compliance is verified by competent authorities or independent certifiers.^[31]
• Group assessment: compliance can be assessed at the level of the area of forest origin or in a group of homogeneous companies.
• DNSH criteria: establishes criteria to ensure that the activity does not cause significant environmental damage to the different categories of objectives: adaptation to climate change, sustainable use of water, circular economy, pollution prevention and protection of biodiversity. For example, the activity complies with applicable regulations and also contributes to reducing the use of pesticides and fertilizers. In addition, it avoids the conversion of sensitive habitats and follows specific recovery plans for the conservation and increase of biodiversity, among other guidelines.

For adaptation to climate change, the technical assessment criteria for this sector follow the same structure as the forestry criteria. Finally, the EU Commission recently published a Delegated Regulation (2021/2486) with criteria for the protection and restoration of biodiversity and ecosystems for environmental protection and restoration activities, which have the following elements:

• Contribution to the objective: the activity must contribute to maintaining or restoring ecosystems, species or habitats. Applies to any operator, regardless of their main area of activity.
• Conservation zone: describes the area of the activity by mapping and presenting the current state of the habitats, characterizing the importance of the zone for regional, national or international conservation. It can present the potential for improvements and connectivity between habitats.
• Management plan: defines contributions to conservation objectives, lists species and habitats benefiting from the activity, establishes conservation and monitoring measures, provides for funding and partnerships needed to carry out the restoration plan.
• Audit: verifies the effectiveness of the management plan and compliance with the DNSH criteria and objectives established at the beginning of the plan’s implementation. Compliance checks must be carried out at the end of the management plan and every 10 years. Compliance is verified by competent authorities or independent certifiers.
• Guarantee of permanence: the area where the activity is carried out must be designated as a protected zone in accordance with the legislation, adopt a land or water use plan approved by the competent authorities or have a contractual agreement, public or private, with conservation objectives. In addition, the operator undertakes to draw up a new management plan compatible with the conservation objectives before the current plan expires.
• Additional minimum requirements: The activity is not intended to compensate for the impacts of other economic activities.^[32] It must also prevent the introduction of invasive species, in accordance with specific regulations.
• DNSH criteria: establishes criteria to ensure that the activity does not cause significant environmental damage to the different categories of objectives: mitigation and adaptation to climate change, sustainable use of water and pollution prevention. For example, the activity causes degradation in areas with a high carbon content in the soil or in the marine environment and adopts measures to minimize the use of pesticides, fertilizers and dangerous chemical substances, following regulations and good agricultural practices.

Colombian Green Taxonomy (TVC)

The TVC aims to support the identification and evaluation of investments that are considered green or environmentally sustainable, i.e., that can contribute substantially to meeting environmental and climate objectives.^[33] Published in 2022 by the Ministry of Finance and Public Credit (Ministerio de Hacienda y Crédito Público) in partnership with the Financial Superintendence of Colombia (Superintendencia Financiera de Colombia – SFC), it is the first sustainable finance taxonomy in South America. It was designed based on the country’s environmental priorities and Colombia’s regulations, commitments, strategies and policies, including at an international level.

The Colombian Green Taxonomy is not a regulation, although the SFC has published several regulations that refer to the Green Taxonomy.^[34] The tool was based on the EU Taxonomy, but with its own methodology for land use sectors, with no criteria yet published in full by the EU (Baccas et al. 2023).^[35]

The TVC is a general framework and establishes a common language for different actors in the public and private sector, such as: bond issuers, investors, financial institutions, public entities, among others. This language makes it possible to identify, classify and differentiate environmentally sustainable economic assets and activities (Gobierno de Colombia 2022).^[36] The TVC defines seven objectives for the country:

• Climate change mitigation
• Climate change adaptation
• Conservation of ecosystems and biodiversity
• Water management
• Soil management
• Circular economy
• Pollution prevention and control.

TVC is being developed in stages, starting with criteria for climate change mitigation, followed by criteria for climate adaptation and conservation of ecosystems and biodiversity. These criteria have been developed for two groups of economic activities: one covers various sectors, from the perspective of climate mitigation; the other focuses only on land use, from the cross-cutting perspective of the taxonomy’s environmental and climate objectives, presented above. The two groups together represent 10 economic sectors, which have 50 categories of activities or economic assets,^[37] considered environmentally sustainable for the purposes of the TVC. Each group has its own structure, requirements and system for assessing alignment with the taxonomy.

The first group corresponds to economically relevant sectors that contribute substantially to climate change mitigation in the country’s national context, namely: energy, construction, waste and CO₂ capture, water supply and treatment, transportation, information and communication technologies, and manufacturing.^[38]

The second group is made up of sectors related to land use—crops, cattle and forestry. Practices were identified that contribute not only to climate change mitigation, but also to other environmental objectives prioritized in the taxonomy—adaptation, conservation of ecosystems and biodiversity, soil, and water management. This structure is based on the recognition that land use activities are transversally related to various environmental challenges that are closely codependent.

Criteria for Land Use

For the land use sectors—crops, cattle and forestry—alignment with the Colombian Green Taxonomy is assessed based on the project or production unit^[39] for each economic activity. Activities related to land use are limited to primary production with a focus on actions within the rural property.

The categories of economic activities considered environmentally sustainable for the taxonomy were developed for the main land uses in Colombia for these sectors. The process of compliance with the taxonomy is based on general requirements for land use and eligibility criteria, including sector-specific criteria.^[40]

The categories of eligible activities can be applied in combination when the production units integrate activities related to more than one of these sectors. In addition, technical assistance, training, and knowledge generation are essential inputs for adopting sustainable practices. Although not explicitly mentioned in all the tables, these activities are eligible as part of the taxonomy-aligned funding in all categories.

The eligibility of an investment proposal begins with compliance with the minimum qualification requirements contained in current regulations. The mechanisms for verifying the criteria, as well as the compliance requirements, are defined and agreed upon by the different parties involved in the investment. In addition, it is necessary to adopt an environmental management plan for the property and comply with the applicable Colombian regulations. The process is detailed below:

Compliance requirements:

• Regulatory: these are the enabling minimums, i.e., you must comply with the minimum Colombian regulations applicable to land use and environmental care, such as: the location of the enterprise must respect the limits of the agricultural frontier^[41] established in regulation; comply with the Land Management Plans (Planos de Ordenamento Territorial – POT) determined by environmental authorities—federal or sub-national—for production and environmental issues; respect environmental legislation; and make rational use of fertilizers and pesticides permitted in Colombia.
• Environmental management: the environmental management plan must include specific data on the property, its location and production context, along with the modifications or improvements the applicant wishes to make.^[42] An environmental management plan is an important tool for measuring and monitoring productivity indicators, efficiency and the use of natural resources. It generates metrics and information for evaluating and monitoring the evolution of the production unit. Taxonomy users must use this plan to determine compliance with the requirements and eligibility criteria. The plan must also include measures for two elements:

• Productive transition planning: eligible practices and technologies are established for each sector—crops, cattle and forestry—and are specified in the sectoral eligibility criteria of the TVC. The planning is developed in stages, and the transition is built with three levels of sequential interventions over time: basic, intermediate and advanced or transformative; each with its respective complexity and impact, and supporting a gradual transformation process.^[43]
• Prevention of damage to natural resources: environmental management and natural resource protection guidelines must be followed for the conservation of ecosystems and biodiversity, soil and water management. The plan must include preventive measures, even if they are not explicitly included in the regulatory compliance requirements.

Eligibility criteria:

• General: guidelines that can be introduced generally in all land use sectors, related to three components: restoration, rehabilitation and/or recovery of natural systems; climate adaptation and mitigation. For each component, principles and measures are specified for three aspects of environmental management related to the objectives of the taxonomy: conservation of ecosystems and biodiversity, soil management and water management.
• Sectoral: these are the eligible categories of investment, practices and technologies specific to each land use sector, organized into the three levels of intervention—basic, intermediate, and advanced—from the least to the most complex/costly. The interventions are the improvements that can be adopted and which contribute to a process of gradual transformation in the country’s cattle, crop, and forestry sectors. These interventions reflect successful experiences in Colombia and are aligned with the country’s sustainability policies. It is understood that these categories can be applied in combination when production units integrate activities in more than one of these sectors.

Below, the sectoral criteria are detailed separately for crops, cattle and forestry.

Criteria for Crops

In the case of crops, the sectoral eligibility criteria apply to all types of crops. The general categories, description of crop practices, including agroforestry, and inputs eligible for the taxonomy are defined.^[44] For an investment proposal to be eligible, the project or enterprise must adopt at least one of the intervention levels, with the basic practices level being the first step if no improvement on the baseline has been implemented. The intermediate and advanced levels are expected to complement the basic practices. The criteria also include two types of complementary technologies related to the use of biodigesters and energy management, which can be adopted depending on the type of production, scale, and other factors.

In addition to the eligibility criteria presented above, the taxonomy presents specific criteria for four crop cultures: coffee, rainfed rice, fruit, and cocoa.^[45] For each of these crops, following the model of the transition criteria for ecological agriculture,^[46] eligible investments, practices and inputs are defined for the three levels of intervention for productive transition, as shown in Table 4.

Table 4. Sectoral Eligibility Criteria for Crops, according to TVC

Source: CPI/PUC-Rio with data from the Gobierno de Colombia (2022), 2024

Criteria for Cattle

For cattle, which occupies around 77% of the area used for agricultural production in Colombia,^[47] the taxonomy defines investments, practices and their respective inputs for the transition to sustainable cattle production as eligible,^[48] prioritizing primary production.^[49] These practices, like the other land use sectors, are divided into basic, intermediate and advanced, allowing for combinations and scaling in the transition plan.

For an investment proposal to be eligible, the project or production unit in the cattle sector must adopt at least one of these levels of intervention. The taxonomy’s recommendation to its users is that eligible practices and technologies should be considered appropriately, on a case-by-case basis, with a view to achieving the quantitative and qualitative goals established in the investment’s environmental management plan. In addition, taxonomy’s eligible cattle practices contribute to restoring soil fertility, improving water quality and quantity, reducing dependence on agrochemical inputs and enabling ecosystem services. The eligibility criteria for investments and practices in the transition to sustainable cattle are presented in Table 5.

Table 5. Sectoral Eligibility Criteria for Cattle, according to TVC

*TVC uses the term silvopastoral systems. The term has been translated by the authors and adapted to the Brazilian context.^[50]

Source: CPI/PUC-Rio with data from the Gobierno de Colombia (2022), 2024

Criteria for Forestry

Native forests occupy more than half^[51] of Colombia’s territory, 63% of which is occupied by indigenous, Afro-Colombian and peasant communities. Colombian Green Taxonomy therefore addresses forests, their conservation and sustainable forest use as fundamental to the country’s development (Gobierno de Colombia 2022).

In the taxonomy, the forestry sector is made up of economic activities related to the management, conservation and proper management of natural forests, as well as the sustainable exploitation of forest plantations for commercial purposes, from primary production to industrial value addition. Eligible investment categories are defined as sustainable forest management.^[52]

For this sector, activities are organized into two groups of eligible investments. The first, aimed at strengthening the sustainability of the forestry sector, focuses mainly on public sector actions and government strategies to guide the development of the sector, improve the business environment and overcome the main environmental challenges. The second group focuses on direct investments in native or planted forest management activities,

carried out by private, public, non-governmental or mixed actors. This group is made up of three categories of activities: (i) restoration of degraded forest soils; (ii) conservation, management and sustainable use of native forests; and (iii) reforestation for commercial purposes. The eligibility criteria for investments and practices for the two groups of forestry sector activities are listed in Tables 6 and 7, respectively.

Table 6. Sectoral Eligibility Criteria for Investments to Strengthen the Sustainable Forestry Sector,
according to TVC

Source: CPI/PUC-Rio with data from the Gobierno de Colombia (2022), 2024

For the second group of activities in the forestry sector (Table 7), a Forest Enterprise Plan^[53] must be adopted that incorporates the environmental management principles of the taxonomy and demonstrates a series of technical requirements based on the following elements:

• Introduction and objectives of the Plan
• Description of the project area: includes geographical location, available natural resources, socio-economic context and legal requirements
• Forest inventory: identifies species, forest volume, forest characteristics of the area
• Technical justification of species and volume of forest utilization: presents criteria and evaluation parameters used
• Forest census: details the location, species, volumes, quantity and use of the products to be harvested
• Forest utilization plan: includes management guidelines, felling planning, silviculture plan, environmental and social management, as well as measures for monitoring the area

For an investment proposal in this group of forestry activities to be eligible, at least one of the intervention levels shown in Table 7 must be adopted.

Table 7. Sectoral Eligibility Criteria for Productive Transition in the Forestry Sector, according to the TVC

Note: The productive transition of the forest sector, according to the TVC, includes the restoration of degraded forest soils, conservation, management and sustainable use of native forests, and reforestation for commercial purposes.
Source: CPI/PUC-Rio with data from the Gobierno de Colombia (2022), 2024

Reflections on the Implementation of the Colombian Green Taxonomy

The TVC is understood to be a dynamic document which, as the tool evolves, will need to undergo updates and expansion of the assets and economic activities eligible as green, as well as the eligibility criteria and both general and specific compliance requirements. Criteria and requirements for other sectors, such as coastal and marine resources, as well as pending environmental development objectives, including the conservation of ecosystems and biodiversity, and adaptation for sectors other than land use, will be developed progressively for new versions of the taxonomy. Although the current version of the taxonomy only partially addresses the adaptation objective, this is a priority topic to be further developed in the short term.

The taxonomy mentions the importance of metrics for evaluating and monitoring investments. However, for land use sector, the tool does not define which metrics should be used to evaluate eligible activities. Recently, in an implementation guide prepared by CBI, some indicators were proposed for this monitoring (Vásquez et al. 2023a). These general indicators cover key areas of environmental monitoring and crop productivity to measure the reduction of GHG emissions, use of areas for regeneration, reduction of agrochemicals, water consumption, soil and water quality, and biodiversity.

Although it is not a regulation in itself, but a guide for identifying sustainable activities and practices, the taxonomy presents and organizes the country’s main medium- and long-term goals for the land use sector related to the taxonomy’s objectives.^[54] In addition, the taxonomy organizes the implementation instruments used, provides some examples in the land use sectors, and establishes metrics to monitor progress towards these goals.

The TVC does not provide specific guidelines or require the incorporation of sustainability strategies, risks and/or governance schemes for its implementation. However, the compliance requirements of the TVC specifically request that the executors of economic activities and assets that may be aligned with the TVC have a management system, according to the magnitude of the investment and the scale of the project/financing executing entity that allows them to deal with the possible significant damage that the project may generate (Vásquez et al. 2023b).

Mexican Sustainable Taxonomy

Mexican Sustainable Taxonomy aims to guide and mobilize sustainable financing in the country and increase the integrity of the financial system by improving the quality of information available to investors and other stakeholders.^[55] Published in 2023 by the Secretariat of Finance and Public Credit (Secretaría de Hacienda y Crédito Público – SHCP) and currently in its experimental phase, the taxonomy is voluntary and is not considered a regulation. Despite this, the financial authorities are analyzing the development of regulatory proposals related to the disclosure of information associated with alignment with the taxonomy for the definition of financial instruments called Environmental, Social and Governance (ESG).

The Mexican tool proposes a national reference framework to clearly and scientifically classify economic activities and investment projects that meet sustainability criteria, defined from a broad approach of environmental, climate and social objectives:

Environmental/Climate:

• Climate change mitigation
• Climate change adaptation
• Management of water and marine resources
• Conservation of ecosystems and biodiversity
• Pollution prevention and control
• Promoting the circular economy

Social:

• Contribution to gender equality
• Access to basic services related to sustainable cities
• Health
• Education
• Financial inclusion

The objectives of the Mexican taxonomy reflect the country’s domestic priorities and international commitments related to sustainability, taking into account both the state of technological development and the country’s productive capacities, as well as its Nationally Determined Contributions (NDCs) and the Sustainable Development Goals (SDGs) of the 2030 Agenda.

Compliance with the taxonomy occurs if the economic activity:

• Is an eligible activity provided for by the taxonomy;
• Satisfies the Technical Evaluation Criteria (Criterios de Evaluación Técnica – CET);
• Complies with DNSH criteria; and
• Meets the minimum safeguards.^[56]

In its first implementation phase, starting in 2023, the taxonomy presents criteria and guidelines for four of the seven objectives, namely objectives specified above.^[57]

CETs are a set of rules for evaluating economic activities and determining whether they are sustainable within the framework of the taxonomy. The taxonomy identifies potential users, the applicability and contribution of the tool to the activities of these users. By meeting the four compliance requirements, companies can disclose the percentage that these activities represent in terms of sales, capital expenditures and operations aligned with the taxonomy, facilitating access to the sustainable finance market through the issuance of bonds and other thematic instruments. Similarly, financial institutions and institutional investors^[58] will be able to measure the alignment of their portfolios and develop taxonomy-aligned financial products. Finally, government agencies will be able to align budget spending with taxonomy objectives to guide sustainable public investment projects.

In order to mitigate climate change, CETs were developed with specific parameters for 124 economic activities in six sectors: agriculture and silviculture, energy, manufacturing, transportation, construction and waste management.^[59] For each activity, a climate mitigation criteria fact sheet was drawn up with four sections:

• Description of the sector and activity: indicates eligible economic activities and products, as well as excluded activities using the North American Industry Classification System (NACIS) Code—a classification system similar to the Brazilian CNAE.
• Main parameter: element or thematic criteria on which the sustainability of an economic activity is assessed.
• Substantial contribution: metrics and thresholds established to assess and measure the environmental or social performance of an economic activity. It determines the minimum criteria for defining whether the economic activity is considered sustainable and, therefore, which demonstrate the economic activity’s contribution to meeting the main parameter.
• DNSH assessment: set of guidelines to ensure that an economic activity does not negatively impact any of the other objectives of the taxonomy—water, adaptation, biodiversity, pollution prevention, and control and circular economy.

For the adaptation objective, criteria were developed to determine whether the economic activity contributes substantially to climate adaptation.^[60] Subsequently, the activity is classified as an adapted or facilitating activity. The former refers to activities adapted to physical and material risks, which integrate measures to reduce risks and solutions to maintain their operation in the event of climate change. Facilitating activities are those that promote adaptation by enabling the reduction of climate risks and vulnerabilities, using technology to create specialized products or services. The taxonomy presents a guide with recommendations for identifying climate risks, based on the EU Taxonomy, and also includes risks and vulnerabilities specific to the Mexican context, based on a survey by the National Institute of Ecology and Climate Change (Instituto Nacional de Ecología y Cambio Climático – INECC). There are specific adaptation measures described for crops and cattle.^[61] In addition, adaptation activities are obliged to comply with the DNSH and minimum safeguard criteria.

With regard to the goal of sustainable cities, themes were identified that contribute significantly to services related to sustainable cities, such as: adequate housing, safe and sustainable public transport, waste management, land use and pollution control, and comprehensive water management.

Finally, in this first phase of the taxonomy, as a cross-cutting issue for the economic sectors, a gender equality index was developed for which a minimum score must be achieved for a company or investment project to be considered aligned with the Mexican tool.^[62]

The Mexican Taxonomy will continue to be refined through the development of criteria and guidelines for the taxonomy’s other objectives, including the completion of the CETs for the other objectives. As the market evolves and learns from the implementation of the taxonomy, criteria for new economic activities can be developed, and metrics and thresholds can be updated.

Criteria for Land Use

Mexican Sustainable Taxonomy incorporated the land use sector—crop, cattle and forestry—as a priority and established mitigation criteria to determine sustainable economic activities in the sector, a trend throughout Latin America, as can also be seen in Colombia’s taxonomy. A total of 64 economic activities were selected from the NACIS code that contribute to mitigation and have the potential to contribute substantially to adaptation to climate change, 53 of which are in the crop subsector, seven in cattle and four in forestry.

Following the general structure of the CETs, the taxonomy establishes a specific climate mitigation criteria fact sheet for each sector. For each sectoral economic activity, the eligible activities, excluded activities and eligible products are indicated, identified by NACIS code whenever possible. The main parameter—Greenhouse Gases and Compounds (Gases y Compuestos de Efecto Invernadero – GyCEI) Mitigation Contribution—is applied to the

activities of the three land use sectors. To assess the substantial contribution, the crop and cattle sectors use the reduction of CO2 equivalent emissions (gCO2e) and carbon capture and storage as reference metrics, while for forests, the metric applied is the increase in forest carbon stocks (in gCO2e). The minimum requirements or criteria for determining whether an activity is considered sustainable under the taxonomy and the DNSH assessment guidelines are specific and differ for each land use sector.

Criteria for Crops

The following items must be included in the technical sheet for agricultural activities:

• Main parameter: GyCEI Mitigation Contribution.
• Metrics: (i) gCO2e reduction, (ii) carbon capture and storage.
• Minimum criteria: applied at the level of the rural property and the activity carried out, based on compliance with the following guidelines and obligations:

• Boundaries of the crop frontier: respect the federal boundaries of the agricultural frontier. It is advisable to submit geospatial information for proof.^[63]
• Disposal of inorganic waste: have a site for the temporary disposal of inorganic waste, verifiable by photograph.
• Transition plan: establish a transition plan with at least two basic or advanced improvement practices, allocating resources according to the practices and investments described in the taxonomy factsheet.^[64]

Following the model adopted in the Colombian Green Taxonomy, the improvement practices in the transition plan for agricultural activities are organized into two categories: basic practices and advanced or transformative practices. The specific eligible investments for crops defined in the taxonomy do not take the form of categories. The eligibility criteria for investments and practices in the transition to sustainable crops are listed in Table 8.

Table 8. Sectoral Eligibility Criteria for Crops, according to the Mexican Taxonomy

Source: CPI/PUC-Rio with data from SHCP (2023), 2024

Finally, the section presents a set of guidelines for assessing DNSH, which are specific to each objective and which must be followed to ensure that crop economic activities do not negatively impact any of these other objectives: water, adaptation, biodiversity, pollution prevention and control, and the circular economy.

Criteria for Cattle^[65]

The main parameter and metrics for the cattle sector are the same as those for the crop sector. In addition to the items that must be included in the technical sheet for crop activities, the taxonomy also establishes ineligibility criteria for cattle activities. The activities cannot

be considered sustainable and therefore neither the main parameter nor the substantial contribution can be considered met if they are carried out under the following criteria: activity carried out on rural property outside the crop frontier, on land with recent land use changes, for example from forest to cattle or crop, as well as from cattle to crop, protected natural areas, among others.

Minimum criteria: applied at the level of the rural property and the activity carried out, based on compliance with at least two of the guidelines below:

• Avoiding or reducing GHG emissions by implementing good practices and mobilizing resources for specific taxonomy-eligible investments.^[66]
• Demonstrate a reduction of at least 8% in GHG emissions by 2030 compared to 2020 emissions for the agriculture sector.
• Maintain and increase carbon reserves for a period of 20 years or more through the application of good practices defined in the taxonomy.
• Demonstrate evidence of soil carbon sequestration potential over time through appropriate management practices or by establishing a verified baseline for carbon capture.
• Have national or international animal welfare certifications or practices that reduce or compensate for methane emissions in relation to a verified baseline.
• Have national and international seals or recognized certifications for organic production, agroecology, conservation and sustainability.
• Report information from the National Cattle Standard (Padrón Nacional Ganadero – PGN) of the Secretariat of Crops and Rural Development (Secretaría de Agricultura y Desarrollo Rural – SADER).
• Making payments for environmental services through the National Forestry Commission (Comisión Nacional Forestal – CONAFOR).
• Dedicate a portion of the property to regeneration or conservation.
• Promote and protect rural and ecological reserves and areas voluntarily set aside for conservation, as well as the management of a greater diversity of native forage species.

The good practices mentioned in the criteria guidelines are organized into a set of categories including their descriptions and examples of eligible actions. The eligibility criteria for investments and practices for cattle are listed in Table 9.

Table 9. Sectoral Eligibility Criteria for Cattle, according to the Mexican Taxonomy

Source: CPI/PUC-Rio with data from SHCP (2023), 2024

Finally, as with crops, the section presents a set of guidelines for assessing DNSH for cattle, which are specific to each objective and which must be followed to ensure that economic activities do not negatively impact any of the other objectives.

Criteria for Forestry^[67]

The main parameter for the forestry sector is the same as that applied to the crop and cattle sectors. However, the substantial contribution metric is specific to the sector and is defined as an increase in forest carbon stocks (gCO2e). The minimum criteria for considering forestry activities as sustainable must be demonstrated by two elements:

• Sustainable Forest Management (Manejo Forestal Sustentable – MFS) as defined by Mexico’s General Law on Sustainable Forest Development (Ley General de Desarrollo Forestal Sustentable – LGDFS). The economic activity^[68] is consistent with MFS if it is carried out in accordance with the applicable legal framework and the technical planning instrument (Forest Management Program) authorized or the opinion issued by the Secretariat of Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales – SEMARNAT).
• Forest management certification: the Mexican government, through SEMARNAT and CONAFOR, actively promotes forest certification as part of the social criteria of the national forestry policy. The forest management certification process strengthens the guarantee of sustainability of forest ecosystems under management that meet the minimum criteria established. The taxonomy specifies the government’s instruments for certifying forest management to meet the minimum sectoral criteria.

In addition to the minimum criteria, the forestry sector factsheet establishes criteria for demonstrating compliance with the main parameter and the substantial contribution of the economic activity. These compliance criteria are specific to each economic activity and must be proven by documentary evidence of voluntary forest certifications, domestic or international, or official documents issued by SEMARNAT. For both cases, the technical sheet specifies which documentary evidence must be presented. If the economic activity does not meet these criteria, it will not be considered sustainable by the taxonomy.

It is worth mentioning that the economic activity of forest nurseries is treated differently by the Mexican taxonomy, having its own minimum criteria with specific objectives and documentary evidence that must be demonstrated. Furthermore, for this activity, there are no criteria for demonstrating compliance with the main parameter. Finally, the sector factsheet presents a set of guidelines for assessing DNSH for the forestry sector, which are specific to each objective and which must be followed to ensure that economic activities do not negatively impact any of the other objectives.

Domestic Taxonomies

FEBRABAN Green Taxonomy

The most recent version of FEBRABAN Green Taxonomy, the association that represents the banking sector in Brazil, was launched in 2020, including three ways of classifying economic activities: “green economy”, “exposure to environmental risk” and “exposure to climate change” (FEBRABAN 2020; 2021). Prior to this, FEBRABAN had already been measuring the volume of bank credit allocated to environmentally responsible activities since 2015, based on voluntary reports from financial institutions and, since 2019, based on data from the BCB’s Credit Information System (Sistema de Informação de Crédito – SCR). Applying this methodology to SCR data makes it possible to measure the evolution of flows and the alignment of the entire universe of bank credit for legal entities in Brazil with FEBRABAN’s definition of economic sectors in the green economy.

In the case of the classification of green economy sectors,^[69] which selects economic activities that generate socio-environmental benefits, the categories mix two aspects: the scale of the contribution (moderate or high) and the type of contribution (environmental, social or socioenvironmental), resulting in six categories. There is no category for negative impacts. When an economic activity is not recognized in one of these categories, it is simply left blank.

The taxonomy is based on three other initiatives: the Climate Bonds Taxonomy, the EU Taxonomy and the Social Bond Principles (SBP). The taxonomies used as references present eligibility requirements to be verified at the operation level (use of resources). However, these requirements and criteria are not used by the FEBRABAN Green Taxonomy, which classifies financial flows only at the level of economic activity, with the purpose of measuring the balances of financial institutions’ active credit portfolios.

The other classifications in the FEBRABAN Green Taxonomy relate to the degree of exposure to environmental risk or climate change of financial institutions, and not to the impact generated by the economic activities they finance. However, the degree of exposure to environmental risk is one of the criteria used to define the level of an activity’s contribution to the green economy. Activities with high exposure to environmental risk can, at most, be categorized as having a moderate contribution to the green economy objective.

The current methodology (FEBRABAN 2021) assigns categories of high, moderate or no contribution to economic activities at the CNAE subclass level. Using the CNAE to assign green economy categories has the advantage of being applicable to all economic activities, since this is the official standardization of economic activities in the country. However, it has limitations, since it does not allow different activities to be differentiated from the point of view of environmental impact within the same subclass, which is already the most granular level of the CNAE. For example, the same CNAE subclass encompasses both the production of renewable energy and fossil fuels. In addition, the use of the CNAE does not allow us to assess how much of the credit for individuals can be considered aligned with the green economy. This type of credit is particularly relevant for agriculture activities.

To minimize these limitations, the taxonomy includes a complementary module on federal financing lines for crops and renewable energy, including rural credit, constitutional funds and BNDES financing. These lines and programs were selected based on their alignment with socio-environmental criteria—available in the Rural Credit Manual (Manual de Crédito Rural – MCR)—with the FEBRABAN Green Taxonomy definition of green economy. This module includes financing programs that can be monitored and verified through the BCB’s Rural Credit and PROAGRO Operations System (SICOR). The lines considered for agricultural activities are described in Table 10.

BNDES Sustainable Taxonomy

The BNDES has worked on several fronts to promote the sustainable finance agenda in Brazil, and the climate agenda is a strategic part of the bank’s work. The BNDES has established guidelines and a set of actions to tackle climate change, which include biodiversity, loss and damage, mitigation and adaptation (BNDES 2022; 2023). The bank already has methodologies for categorizing its disbursements since at least 2011, but is undergoing a review process for a new taxonomy to support the management of its portfolio to achieve the goals set out in its guidelines (Maia 2023). This taxonomy will be applied to measure the alignment of the bank’s project portfolio in direct and indirect operations.^[70]

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[1] The BNDES SustainableTaxonomy is the only one not included in the tables, since the criteria for the new methodology have not yet been published. The BNDES has been monitoring disbursements related to the Green Economy and Social Development since 2011 (BNDES 2022). A process to revise the methodology is underway and the BNDES Sustainable Taxonomy is expected to be launched in 2024 (Maia 2023).

[2] Second Party Opinion (SPO) providers use the criteria of the Climate Bonds Standard as a reference to label financial operations as green or sustainable, even if the issue is not certified by CBI.

[3] Use of Proceeds (UoPs) debt instruments: The proceeds of such instruments are allocated to specific projects, assets, activities, or expenditures which align with the Climate Bonds Sector Specific Criteria; Certification of the environmental credentials of specific debt instruments, assets, or a portfolio of assets, in accordance with the Climate Bonds Sector Specific Criteria (CBI 2023b, p. 6).

[4] MAPA and CBI have a Memorandum of Understanding (MOU), signed in 2019 and renewed in 2022, which aims to strengthen actions to promote the sustainability of Brazilian agriculture (CBI 2022).

[5] Only resource or asset use debt instruments are eligible for the Climate Bonds Standard (certification) based on the criteria for agriculture and forestry. According to CBI, certification for non-financial corporate entities and Sustainability-linked Debt Instruments (SLDs) for agriculture is under development.

[6] For this type of crop, CBI only has criteria for Mexico. More information is available at: CBI (2019).

[7] Unit of production includes inputs; capital goods; production; products; waste management; primary processing or storage before the point of sale; and associated conservation areas. Outside the production unit are the eligible activities (and the products and services related to them) to be used in third-party production units for the purposes mentioned (CBI 2023c).

[8] The criteria indicate the uses of resources in automatic compliance, conditional compliance with CBI certification requirements and those that are not eligible. The restoration, reforestation or rehabilitation of areas, upgrading or maintenance of fertilizer production infrastructure and the costs of acquiring, upgrading, maintaining or operating aircraft used in the forest concession are not eligible for certification under any circumstances (CBI 2018).

[9] Free Prior and Informed Consent (FPIC) is applied when property rights are potentially affected or projects may lead to the removal or relocation of housing or activities. FPIC must be carried out in accordance with the references indicated by the CBI, such as International Labor Organization (ILO) Convention no. 169 on Indigenous and Tribal Peoples, Forest Stewardship Council (FSC) certification, among others. More information is available at: Climate Bonds Initiative (CBI). Forestry Criteria – The Forestry Criteria for the Climate Bonds Standard & Certification Scheme. 2018. bit.ly/3VtmKMd.

[10] These criteria may vary according to the type of forest between applicable requirement, non-applicable requirement or applicable requirement in some scenarios. More information is available at: Climate Bonds Initiative (CBI). Forestry Criteria – The Forestry Criteria for the Climate Bonds Standard & Certification Scheme. 2018. bit.ly/3VtmKMd.

[11] The criteria are being developed in consistency with the regulation for Deforestation-Free Products, known as the European Union Deforestation-Free Regulation (EUDR).

[12] Including alignment with the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises and the United Nations (UN) Guiding Principles on Business and Human Rights, as well as the eight fundamental conventions identified in the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work and the International Bill of Human Rights (EY 2023). There is also a proposal to create a taxonomy with emission-intensive economic activities that are significantly harmful to the environment (grey/dirty taxonomy).

[13] The technical criteria are defined for a specific description of an economic activity, and whenever possible, include references to the codes in the Statistical Classification of Economic Activities in the European Community (Nomenclature statistique des activités économiques dans la Communauté européenne – NACE) that can be associated with it. These references are understood to be indicative and cannot prevail over the specific definition of the activity contained in its description in the taxonomy (OECD 2020). This system works in a similar way to the CNAE
in Brazil.

[14] In its first stage, the European Union Taxonomy defined its general framework and moved on to detail through delegated acts, i.e., criteria applied to specific topics, the first two of which focus on climate change mitigation and adaptation (Ricas and Baccas 2021). Initially, nine economic sectors were prioritized for the establishment of criteria due to the relevance of these sectors for climate mitigation, including the NACE macro-sector of crop, forestry and fisheries, which includes forestry activities (OECD 2020).

[15] The activities in this sector have no code references in NACE.

[16] Although the criteria for activities in the agricultural sector have not yet been regulated, in 2022, the Sustainable Finance Platform provided recommendations for criteria for this sector, with a view to making a substantial contribution to protecting biodiversity and ecosystems. In 2019, prior to the taxonomy’s regulation, the Technical Expert Group published mitigation criteria recommendations for these sectors (WWF 2023). The documents can be consulted on the Sustainable Finance Platform (2022).

[17] Large companies pursuant to Article 3 of the management report and pursuant to Article 19-A or Article 29-A, respectively, of Directive 2013/34/EU of the European Parliament and of the Council. Large companies defined in this way and listed companies must report the share of their current and future revenues (capital expenditure) from activities aligned with the taxonomy.

[18] According to Article 16 of the taxonomy regulation, an enabling activity is an economic activity that directly enables other activities to contribute substantially to one or more taxonomy objectives, provided that such economic activity: (a) does not result in the immobilization of assets that compromises long-term environmental objectives, taking into account the economic useful life of these assets; and (b) has a substantial positive environmental impact, based on life-cycle considerations (EU Regulation no. 2020/852, Art. 16).

[19] Forestry activities are described respectively as: establishment of forests through planting, deliberate seeding or natural regeneration on land that was previously under different use or unused; rehabilitation and restoration of forests as defined by national legislation; forest management activities as defined by national legislation, with the aim of preserving one or more habitats or species. If national legislation does not establish these definitions, the taxonomy criteria describe the correspondence of the activity (Comissão Europeia nd).

[20] For more information, see: Delegated Regulation (EU) no. 2021/2139 of the EU Commission, June 4, 2021. bit.ly/3TDAjq3.

[21] Comply with requirements in the area of forest procurement to ensure the long-term maintenance and enhancement of forest carbon reserves and sinks in accordance with Article 29, no. 7, item b of Directive 2018/2001/EU.

[22] Companies with less than 13 hectares are exempt from this obligation.

[23] Economic operators must commit to keeping forest plans up to date in order to seek climate benefits, as required by law, and to compensate for any reduction with equivalent activities specified in the regulations.

[24] Audits can be carried out in conjunction with other forestry or climate certifications to reduce costs.

[25] For more information, see: Delegated Regulation (EU) no. 2021/2139 of the EU Commission, June 4, 2021. bit.ly/3TDAjq3.

[26] The physical risks associated with the climate that are relevant to the activity have been identified from the list in the appendix to the European Commission’s Delegated Regulation 2021/2139/EU.

[27] Para mais informações, consultar:
Regulamento Delegado (UE) nº 2021/2139 da Comissão, de 4 de junho de 2021. Bit.ly/3TDAjq3.
Regulamento Delegado (UE) nº 2023/2486 da Comissão, de 27 de junho de 2023. bit.ly/3x58FdB.

[28] Wetland restoration encompasses economic activities that seek to restore these areas to their original condition or reinforce their functions, without necessarily restoring them completely. The term “wetlands” refers to areas defined internationally as “wetlands” or “peatlands” by the Ramsar Convention. The activity does not have specific NACE codes, but is included in category 6 of the Classification of Environmental Protection Activities and Expenditure (CEPA).

[29] Economic activity is defined as the development and execution of conservation activities, including restoration, to improve terrestrial, freshwater and marine habitats, ecosystems and populations of fauna and flora. It does not include ex situ conservation, such as in botanical gardens or seed banks. It has no specific NACE codes, but is partly covered by code R91.04.

[30] Economic operators must commit to keeping recovery plans up to date in order to seek climate benefits, as required by law, and also to compensate for any reduction with equivalent activities specified in the regulations.

[31] Audits can be carried out in conjunction with other forestry or climate certifications to reduce costs.

[32] Only net biodiversity gains resulting from conservation or restoration can be counted as a substantial contribution from this activity.

[33] Substantial contribution is the potential of an asset or economic activity to contribute directly to climate change mitigation or to enable the substantial contribution of other activities (Gobierno de Colombia 2022).

[34] The SFC’s regulations aim to increase the transparency of the capital markets and minimize the risk of greenwashing in green bond issues, the appointment of voluntary pension funds, portfolios, and the disclosure of social, environmental and climate information by the market. For more information see SFC External Circular no. 005/2022.

[35] The methodology for land use is based on international taxonomies and the World Bank’s experience in emerging countries. The criteria reflect Colombia’s environmental goals, including those of international agreements, in line with national legislation and compliance schedules. Changes related to land use are the main source of greenhouse gas emissions in Colombia (59%), followed by energy (31%), waste (7%) and industrial processes (3%).

[36] For actors in the financial system, the taxonomy will be used to identify financing and investment opportunities and mobilize resources to support the transition to a sustainable economy, measure the alignment of their portfolios with green assets and activities, structure green products and solutions; strengthen disclosure and transparency practices on capital mobilized for environmental objectives, among other purposes. Supervised entities and securities issuers are considered market players.

[37] “The assets produced are the result of economic production and therefore constitute products at the time of creation” (Gobierno de Colombia 2022, p. 28, as translated by the authors).
Original text: “Los activos producidos son el resultado de la producción económica y constituyen por lo tanto productos al moment de la creación”.

[38] This group represents seven sectors and 47 economic activities and assets with a substantial contribution to the environmental objective of mitigating climate change. Although there is an initial list with the equivalence of the taxonomy’s activities to the International Standard Industrial Classification (ISIC) codes, in order to meet its specificities and objectives, the Colombian tool adopts its own classifications and descriptions for economic activities. By its nature, the ISIC classification categorizes economic activities without discriminating specific products, methods or processes for preparing or obtaining them, and therefore does not provide all of the taxonomy’s needs. As part of the taxonomy update, more specificity in the identification of economic activities will be worked on to improve correspondence with statistical classifications in partnership with Colombia’s official statistics agency—the National Administrative Department of Statistics (Departamento Administrativo Nacional de Estadística – DANE).

[39] According to the Gobierno de Colombia (2022, p. 32, as translated by the authors), “Productive unit: farm, property, plot, production area or establishment where agricultural production activities are carried out”.
Original text: “Unidad productiva: Finca, predio, parcela, zona de producción o establecimiento donde se llevan a cabo actividades de producción agropecuaria”.

[40] Compliance requirements have a similar function to safeguards: to avoid and prevent possible damage caused by the project or activities of the production unit.

[41] “The boundary of the agricultural frontier is the limit of the rural land that separates the areas where agricultural activities are carried out, the conditioned areas and protected areas, those of special ecological importance and the other areas in which agricultural activities are excluded by mandate of the law.” (Gobierno de Colombia 2022, p. 147, as translated by the authors).
Original text: “La Frontera Agropecuaria Nacional está definida como ‘el límite del suelo rural que separa las áreas donde se desarrollan las actividades agropecuarias, las áreas condicionadas y las áreas protegidas, las de especial importancia ecológica, y las demás áreas en las que las actividades agropecuarias están excluidas por mandato de la ley’”.

[42] The plan can also be a business plan or another instrument for planning the changes to be adopted in the production unit where environmental management is integrated. The plan should contain the diagnosis of the property, objective of the intervention, environmental situation, definition of the transition, compliance requirements and expected results, such as increased productivity and efficiency in the use of natural resources. In addition, guidelines in the taxonomy implementation guide recommend that the plan include characteristics of the property, such as area and environmental situation, a disease and pest control plan, measures to control contamination of water bodies, measures to control the use of agrochemicals, measures to prevent habitat fragmentation, and demonstration of evidence of articulation with the applicable Integral Plan for Territorial Climate Change Management (Planes Integrales de Gestión del Cambio Climático Territorial – PIGCCT).

[43] Through the three levels of intervention measures—basic, intermediate, and advanced—the taxonomy establishes non-binary criteria for the land use sector. This type of approach can contribute to more universal access to the taxonomy for the different types of productive units in the sector. The majority of farms in Colombia are small and medium-sized, located in very diverse territories.

[44] The inputs specify what can be financed for each practice.

[45] These four crops occupy 41% of the area cultivated in Colombia.

[46] According to the Ministry of Crops and Rural Development (Ministerio de Agricultura y Desarrollo Rural – MADR) Resolution no. 187 of 2006, “ecological production is a production process that considers soil fertility as a key factor in food production, drastically reduces the use of external inputs in the production unit and promotes practices that guarantee quality and safety throughout the ecological food production chain” (Gobierno de Colombia 2022, p. 158, as translated by the authors).
Original text: “La producción ecológica es un proceso productivo que considera la fertilidad del suelo como factor clave para la producción de alimentos, reduce en forma drástica el uso de insumos externos en la unidad productiva y promueve prácticas que garantizan la calidad e inocuidad en toda la cadena productiva de alimentos ecológicos”.

[47] The cattle sector occupies 39 of Colombia’s 51 million hectares of agricultural production area (Gobierno de Colombia 2022 apud DANE 2019).

[48] The concept of sustainable cattle production is based on the definition given by the Mesa de Ganadería Sostenible initiative (2019): “it is the development of cattle production, in which the impacts and benefits of the production function are fully recognized, within the concept of the production chain; based on this, the aim is to improve productivity, profitability, product quality, competitiveness, ecosystem conservation, generation of ecosystem services, reduction of the carbon footprint and adaptation to climate change, for the benefit of cattle farmers and society in general” (Gobierno de Colombia 2022, p. 149, as translated by the authors).
Original text: “Ganadería sostenible: es el desarrollo de la actividad ganadera, en el cual son reconocidos integralmente los impactos y beneficios en la función de producción enmarcados en el concepto de cadena productiva; a partir de la cual, se busca un mejoramiento de la productividad, la rentabilidad, la calidad de los productos, la competitividad, la conservación de los ecosistemas, la generación de servicios ecosistémicos, la reducción de la huella de carbono y la adaptación al cambio climático para el beneficio de los ganaderos y la sociedad en general”.

[49] Future versions of the taxonomy may integrate secondary cattle farming activities.

[50] Original text: “Los sistemas silvopastoriles son arreglos agroforestales en los que interactúan en forma simultánea plantas leñosas perenes (árboles o arbustos), plantas herbáceas o volubles (pastos, leguminosas herbáceas y arvenses) y animales domésticos”.

[51] 59 million hectares of the country’s 114 million hectares.

[52] The definition of sustainable forest management is consistent with the principles and definitions of Decrees no. 1791/1996 and no. 1076/2015 of the Colombian Executive Branch.

[53] This model is based on the requirements established for forest plantations by the following Colombian laws: Law no. 139/1994 and Decree no. 1791/1996.

[54] “Nationally Appropriate Mitigation Actions (NAMAs) are policies, regulations, programs or other types of actions that reduce GHG emissions relative to their trend levels and that, in turn, contribute to achieving the sustainable development goals of the implementing countries, which are mainly developing countries” (MADS nd, as translated by the authors).
Original text: “Las Acciones de Mitigación Nacionalmente Apropiadas (NAMAs por su sigla en inglés) son políticas, regulaciones, programas u otro tipo de acciones que reducen las emisiones de Gases Efecto Invernadero de sus niveles tendenciales, y que a su vez, contribuyen a alcanzar los objetivos de desarrollo sostenible de los países que las implementan, que son principalmente países en desarrollo”.

[55] Original text: “Financial integrity describes the characteristics of a financial system that operates in a clean, transparent and accountable way” (Transparency International nd).

[56] The minimum safeguards aim to cover issues related to human rights, as well as international good practices in labor and governance, such as Mexico’s current laws and regulations, and international conventions and guidelines, such as: the OECD guidelines for multinational companies, the ILO Declaration on Fundamental Principles and Rights at Work and the UN Guiding Principles on Business and Human Rights, without prejudice to compliance with Mexico’s current laws and regulations.

[57] The Taxonomy presents a methodological summary for drawing up the CETs for the four prioritized objectives, which can be found in Table 1.7 of the taxonomy document (SHCP 2023). For each objective, a main parameter is defined, from which various metrics are selected and thresholds established to assess compliance with the taxonomy. Subsequently, the CETs will be developed for the sustainable cities objective and then for the other social objectives.

[58] Bank and non-bank credit institutions and institutional investors such as pension funds and insurance companies.

[59] These criteria were drawn up by the Sectoral and Thematic Technical Groups (Grupos Técnicos Setoriais e Temáticos – GTSyT), made up of public and private actors, whose mandate is to create CETs.

[60] This identification is carried out by evaluating the CETs of the 124 economic activities that contribute to mitigation, on the understanding that they have the potential to contribute substantially to adaptation to climate change.

[61] In addition to the guidelines and principles mentioned for climate adaptation, activities in these subsectors must adopt at least two of the practices in table 2.5. “Prácticas con impacto sobre la adaptación al cambio climático para los subsectores Agrícola y Cría y Explotación de Animales” of the Taxonomy (SHCP 2023).

[62] The index is obtained from a questionnaire organized into three pillars—decent work (66 points), well-being (54 points) and social inclusion (54 points)—totaling 174 points. An economic activity is eligible for the taxonomy from a minimum score of 72 points (Souza and Gasparotto 2023).

[63] The crop frontier is the set of lands that currently have crop activity plus those that had it in the previous five crop years and are now resting or abandoned due to migration, land regularization or fertility problems (Agreement published in Mexico’s Diario Oficial de la Federación 2019).

[64] The Mexican taxonomy does not provide a conceptual definition for basic practices and advanced or transformative practices. Characterization is carried out only by describing and allocating practices to each of these two categories.

[65] Sector defined in the taxonomy as “animal breeding and exploitation”.

[66] “Agricultural management practices include those indicated in the taxonomy, surveyed with experts in the construction of the taxonomy, as well as projects certified by the Climate Bonds Initiative (CBI), and sustainable investment concepts from the Trust Funds for Rural Development (Fideicomisos Instituidos en Relación con la Agricultura – FIRA)” (Secretaría de Hacienda y Crédito Público 2023, p. 85, as translated by the authors).
Original text: “Las buenas prácticas agrícolas y la aplicación de conceptos de inversión, acciones y prácticas de manejo incluyen aquellas previamente identificadas por iniciativas para el desarrollo de economías bajas en carbono, como los proyectos certificados por el Climate Bonds Initiative (CBI), y los conceptos de inversión sostenibles de los Fideicomisos instituidos en Relación con la Agricultura (FIRA), o bien por aquellas para las que existe suficiente conocimiento científico y consenso de expertos sobre sus efectos de mitigación y las interacciones com otros objetivos medioambientales y de seguridad alimentaria”.

[67] In the Mexican taxonomy, the forestry sector refers to the subcategory “Aprovechamiento Forestal”.

[68] The forestry economic activities for which the compliance criteria presented apply are: forestry, utilization of non-timber forest resources (collection of forest products according to NACIS), and utilization of timber forest resources (“logging” in NACIS).

[69] The concept of Green Economy used is that of the United Nations Environment Program (UNEP), and is one that “improves human well-being and builds social equity while reducing environmental risks and scarcities” (UNEP apud FEBRARAN 2021, p. 4). In this sense, the definition is not just climate or environmental, but also incorporates a social justice dimension.

[70] At the time of publication of this report, the BNDES had not yet publicly disclosed the criteria of the new taxonomy, which is why there is not a more detailed analysis of this initiative in the current report.