AbstractAnimal-mediated pollination is important for agricultural seed and crop production, and critical to overall ecosystem health. However, the scientific literature focused on the economic valuation of pollination services has thus far neglected the role of pollination services in seed production. The marketed food output of many crops is not dependent on pollination services, but these crops indirectly depend on pollination services with respect to their seed production. This study proposes a partial equilibrium framework for identifying the value of pollination services. Using Germany as a case study, we find the value of pollination services is about 33% higher when seed production is considered. This increased valuation is driven by two effects: higher seed costs due to high dependence on pollination services, and a higher demand for seeds due to the land expansion needed to mitigate a potential pollinator collapse. This study demonstrates that more sophisticated approaches are needed to estimate the economic value of pollination services more accurately.
To bring our economies on a path to climate neutrality, investments in carbon-intensive production processes have to stop. At the same time, we need to mobilise large amounts of capital for investments conducive to a just transition. Reforming the financial sector in a way that allows this redirection of capital flows to take place is crucial. As one element of a comprehensive sustainable finance strategy, taxonomies can potentially play a pivotal role in this regard. By providing common definitions for sustainable economic activities, these taxonomies aim to increase transparency on financial markets and help market participants to align their investment decisions with sustainability considerations. This policy brief presents policy recommendations concerning the implementation of sustainable finance taxonomies based on experiences with the South African Green Finance Taxonomy (GFT). It mainly builds on data collected in semi-structured expert interviews with different stakeholders of the GFT conducted in South Africa between February and April 2023 (Hilbrich et al., 2023). The implementation phase of the GFT has revealed multiple challenges, including a need for improved regulatory embedding and enhanced capacities on the part of potential users. This has led to a low uptake by market participants. To address these challenges, this policy brief presents four recommendations that are of relevance not only for South Africa but also for many other countries that are currently implementing a sustainable finance taxonomy: Voluntary taxonomies are insufficient to facilitate the necessary widespread uptake. Public institutions need to set a credible signal that a taxonomy will indeed become the common standard on the financial market. National regulators should issue guidance notes on taxonomy usage and consider implementing mandatory reporting rules. Regulators or stock exchanges should require issuers of green financial instruments, including green bonds, to align their project eligibility criteria with a sustainable finance taxonomy. In addition, a good coordination and a clear distribution of responsibilities among governance actors is crucial in the implementation phase. A taxonomy can only fulfil its potential if it is meaningfully integrated into an overarching sustainability strategy. Taxonomy reporting requires both capacity and expertise. Both market and governance actors need to ensure possibilities for learning and for exchanging specialised knowledge. Pilot studies can help reduce uncertainties and train practitioners on the job. A lack of bankable green projects decreases the potential of a taxonomy to redirect capital flows and reduces incentives to adopt a taxonomy. Development banks should provide risk capital and seed funding to help develop green projects. Interoperability between different taxonomies is an essential goal. The European Union (EU) should formally recognise taxonomies of other jurisdictions that meet certain standards as equivalent to the EU taxonomy (and communicate under what conditions it is willing to do so). Accordingly, assets shown to align with a particular taxonomy would be recognised as aligned with the EU taxonomy without further assessment.
In recent years, many jurisdictions have developed sustainability taxonomies that aim to increase transparency of financial markets and redirect capital flows to sustainable investments. Such sustainable finance policies can be important levers because today's investments shape economic production processes for decades. This case study on South Africa's Green Finance Taxonomy (GFT) addresses the question of what factors influence the adoption of sustainability taxonomies by potential users. It finds that one year after its publication, the GFT has hardly been used in practice. Important factors hindering an effective implementation are a lack of regulatory embedding, the absence of a legal recognition of the GFT by the European Union (EU), a hesitancy among financial market participants to build capacities to collect the necessary data, and fossil-fuel path dependencies in South Africa's economy. These findings have important policy implications (e.g. regarding accompanying governance measures) for implementation processes in many countries in the coming years.
