Cape Verde Launches First Sustainability Taxonomy to Channel Green Investment Into Energy and Water Resilience

The Bank of Cape Verde (BCV) has launched a public consultation on the country’s first sustainability taxonomy, establishing a new framework designed to guide investment towards environmentally sustainable activities in strategic sectors including energy and water. The initiative, which will remain open for public input until 10 August 2026, represents a significant step in Cape Verde’s efforts to strengthen climate resilience, improve sustainable finance standards and attract investment aligned with its long-term development priorities.

The proposed taxonomy provides technical criteria for determining whether economic activities can be classified as sustainable. By creating a common framework for investors, financial institutions and policymakers, the system aims to reduce uncertainty around green investments and improve the allocation of capital towards projects that support climate mitigation, adaptation and resource efficiency. For Cape Verde, the development of a sustainability taxonomy carries particular importance given the country’s economic structure and environmental vulnerabilities. The Atlantic archipelago has significant potential in renewable energy, maritime industries and sustainable tourism, but remains highly exposed to climate-related pressures, including prolonged droughts, water scarcity, rising sea levels and extreme weather events.

According to the Bank of Cape Verde, the taxonomy is intended to support the transition towards a low-carbon and climate-resilient economy by identifying activities that contribute positively to environmental and social objectives. The framework provides investors with clearer guidance on which projects qualify as sustainable, helping financial institutions incorporate environmental considerations into lending and investment decisions. The move reflects a broader global shift in sustainable finance, where governments and regulators are increasingly developing classification systems to prevent greenwashing and improve transparency in capital markets. Sustainability taxonomies have become important tools for aligning financial flows with climate and development objectives by establishing measurable standards for economic activities.

Cape Verde’s first taxonomy is structured around seven key objectives: six environmental goals and one social development objective. These include climate change mitigation and adaptation, sustainable use and protection of water and marine resources, transition towards a circular economy, pollution prevention and control, protection of biodiversity and ecosystems, and social development. In the initial phase, the Bank of Cape Verde has prioritised detailed technical criteria related to climate change mitigation and adaptation. Other environmental objectives are addressed through the “do no significant harm” principle, requiring activities that contribute to sustainability goals to avoid creating substantial negative impacts in other environmental areas.

This approach mirrors international sustainable finance frameworks, including those developed by major financial markets and institutions seeking to standardise environmental assessments. By adopting similar principles, Cape Verde is seeking to strengthen investor confidence and improve compatibility with international financing mechanisms. The development of the taxonomy has involved international cooperation, with technical support provided through the European Union’s Sustainable Finance Advisory Hub. The programme is implemented by the United Nations Development Programme (UNDP), with additional technical contributions from the Sustainable Finance Taxonomy Mapper.