Sustainability and Climate Risk (SCR) — Question 43

A national regulator develops a new taxonomy for environmentally sustainable activities and policies. The taxonomy will provide clarity for companies, capital markets, and policymakers on sustainable activities. During the development process, regulators survey taxonomies used across various jurisdictions and decide to model after the EU Taxonomy.
Which characteristic of the EU Taxonomy will the regulator most likely implement in the new taxonomy?

Answer options

• A. Emphasize fossil-fuel activities that play a significant role in the region’s energy supply
• B. Assess the impact of fund management on environmental and climate-related aspects
• C. Set performance thresholds for economic activities that can be considered green
• D. Guide sectoral coalitions of experts to broaden and promote the growth of a green finance ecosystem

Correct answer: C

Explanation

The correct answer, C, is right because the EU Taxonomy sets specific performance thresholds for what qualifies as a green economic activity, which is essential for providing clear guidelines. Option A is incorrect as it contradicts the sustainability focus of the EU Taxonomy; option B, while relevant, does not directly pertain to defining green activities; and option D, although supportive of green finance, does not align with the core characteristic of establishing criteria for economic activities.