Press releases

EU and China signal points of agreement for defining green investment – but leave door open for fossil fuels

EU and China flags. Photo by Mark Knoke on Flickr.
EU and China flags. Photo by Mark Knoke on Flickr.
  • The EU and China The EU and China have today at COP26 set out the extent to which their visions for defining green investment are aligned.
  • The announcement was made at a side event of the International Platform on Sustainable Finance (IPSF). This coalition consists of 18 countries representing 55% of greenhouse gas emissions, 50% of the world population and 55% of global GDP.
  • The publication of the EU-China ‘Common Ground Taxonomy’ coincides with EU internal discussions about whether to define natural gas and nuclear power as ‘green’ investments. Such a course of action would be seen by many as being in direct conflict with the Paris Agreement.


Today at a COP26 side event and the IPSF annual meeting, the EU Commissioner McGuinness and representatives of other IPSF members announced a series of joint reports on the alignment of sustainable finance tools and approaches, most notably on the classification of green investments and ESG disclosure measures and policies.

The centrepiece announcement is of a Common Ground Taxonomy that builds on EU and Chinese classification systems. This is the culmination of two years of work to establish international standards for defining green investments and guiding financial flows towards sustainable projects. It analyses 80 economic activities across six industrial sectors, with a focus on climate change mitigation, to improve the comparability and future interoperability of taxonomies around the world.

This long-awaited announcement comes at a time when the EU is yet again grappling with internal politically driven disagreements on what to classify as green. There are active discussions on the inclusion of natural gas and nuclear power, even though the IEA has made it clear that to keep global warming below 1.5 degrees there can be no new investment in fossil fuels.

Today’s announcement also builds on recent domestic efforts in China to enhance its green finance regulations. In July 2021, China’s central bank published a revised version of the country’s Green Bond Catalogue that excludes coal-related projects. China’s latest climate policy package, published in late October, highlighted the need to “supplement and improve” the country’s green finance catalogues.

The IPSF’s accompanying report on ESG disclosure compares the state of ESG disclosure policy measures across 19 jurisdictions – 17 IPSF jurisdictions, Brazil and the US. It underscores that the current state of ESG disclosure policy is not yet commensurate with the scale of global sustainability challenges, with climate-related disclosures still voluntary in most jurisdictions. Today’s event confirmed that IPSF work will include US policies, however, the US has not yet formally joined the group.


Tsvetelina Kuzmanova, Policy Advisor, EU Sustainable Finance, at E3G, said:

“Yesterday at COP26 the World Bank said that green investment taxonomies around the world should apply to both private and public finance. A new common ground taxonomy, supported by a large number of countries and initiated by the EU and China, clearly demonstrates the global efforts and cooperation towards defining green investments. The EU taxonomy is the market standard and must continue to be guided by science if global investments are to be aligned with climate safety.”

Kate Levick, Associate Director, Sustainable Finance, at E3G, said:

“A common approach to green investment between the EU and China ought to have been a breakthrough moment of celebration. It is inexplicable that during COP26 the European Member States are simultaneously undermining this hard-won diplomatic achievement by openly discussing adjusting the taxonomy in a way that is not compliant with their obligations under the Paris Agreement.”

Sima Kammourieh, Senior Policy Advisor, Sustainable Finance, at E3G, said:

“The key jurisdiction not yet involved in this important international dialogue is the United States. We were pleased to note that IPSF work on disclosure has now been extended to cover US developments. We call on the US to become a full member of the IPSF coalition.”

Byford Tsang, Senior Policy Advisor, at E3G, said:

“This is a much-needed attempt by two of the world’s largest emitters to align the rules of the road for the global transition to net zero. It shows that the EU and China can work together on global issues such as climate, despite their differences in other areas. The common ground taxonomy also lays a solid foundation for the G20 Sustainable Finance Working Group to drive great comparability in sustainable finance standards globally.”

Available for comment

The following people are available for commentary – please contact them directly:

Tsvetelina Kuzmanova (on Sustainable Finance)

+32 (0) 483989651 |

Byford Tsang (on China Strategy)

+44 (0) 7508 759 872 |

For further enquiries email or phone +44 (0)7783 787 863

Notes to Editors

  1. E3G is an independent climate change think tank accelerating the transition to a climate safe world. E3G specialises in climate diplomacy, climate risk, energy policy and climate finance. -> About
  2. To receive updates and analysis from COP26 via E3G’s daily media WhatsApp broadcast, register here.


Subscribe to our newsletter