Conceptualising Interoperability of Sustainable Finance Taxonomies: A Three-Dimensional Framework for International Regulatory Alignment

Abstract

The rapid proliferation of sustainable finance taxonomies worldwide has created an urgent demand for systematic approaches to international regulatory alignment, namely the interoperability of these taxonomies. However, what interoperability means or should mean in sustainable finance remains an underexplored research topic. This article proposes a new three-dimensional framework to deconstruct and analyse the concept of “interoperability” in sustainable finance. The framework disaggregates interoperability into three distinct but interrelated dimensions: granularity (depth of detail), prescriptiveness (legal bindingness), and integration depth (system relationship). We use current major international interoperability initiatives, such as the EU-China-Singapore Common Ground Taxonomy, to demonstrate the framework’s utility in measuring, assessing, and improving cross-border alignment of sustainable finance taxonomies. Our findings suggest that full interoperability may not be achievable or even desirable across all dimensions, but targeted improvements along specific axes can significantly enhance cross-border green capital flows while maintaining regulatory stringency and respecting national regulatory sovereignty.