Defining Climate-Aligned Investment : An Analysis of Sustainable Finance Taxonomy Development

The green bond market has grown rapidly since its inception in 2007. Climate-aligned standards provide investors with the confidence that their investments deliver a measurable climate benefit. Serving as a benchmark, these standards demonstrate alignment with the Paris Agreement, against which green bond issuers can then report compliance. This paper draws on the authors' experiences as practitioners and researchers helping to develop the Climate Bonds Standard and the European Union's Sustainable Finance Taxonomy to analyze the methodological considerations that were vital to the development of both taxonomy systems. The first section positions the role of standards development within the context of the green bond market and is followed by an analysis of the factors that affect the Climate Bonds Standard criteria development process. This paper concludes with key takeaways and suggestions for areas of future research on climate-aligned standards development