Supporting the development of Madagascar’s Sustainable Finance Taxonomy

Financial institutions, companies, policymakers, and international partners in Madagascar currently rely on inconsistent definitions of sustainability — creating confusion, raising transaction costs, and increasing the risk of greenwashing. Working closely with Madagascar’s Central Bank, financial regulators, financial institutions, and market participants, Climate & Company is helping develop a taxonomy that classifies economic activities across the country’s core sustainability priorities: climate mitigation and adaptation, biodiversity conservation, the blue economy, the circular economy, and financial inclusion.

Madagascar’s development path is directly shaped by its exceptional and globally significant natural capital, including extensive marine and coastal ecosystems that underpin fisheries, coastal livelihoods, and tourism. A taxonomy grounded in this reality can help:

• Channel capital toward genuinely sustainable activities, including blue economy sectors such as sustainable fisheries and marine ecosystem protection, alongside climate and biodiversity priorities;
• Strengthen financial stability by helping banks and investors better identify and manage climate, environmental, and social risks tied to natural capital dependence;
• Unlock access to international sustainable finance, making it easier for Madagascar to issue green or sustainability bonds, structure blended finance, and demonstrate alignment with climate and biodiversity finance commitments;
• Position Madagascar as a regional leader in sustainable finance and climate resilience, turning vulnerability and unique natural capital — ocean included — into a driver of long-term, inclusive growth.

Drawing on frameworks including the World Bank’s Guide on Developing a National Green Taxonomy, the IFC-SBFN Toolkit on Sustainable Finance Taxonomies, the UNDP Step-by-Step Guide, and the Common Framework for Sustainable Finance Taxonomies for Latin America and the Caribbean, the project began by aligning closely with partners on scope and approach — defining what kind of taxonomy Madagascar needs, and anchoring the process in principles of transparency, scientific rigor, and interoperability with international standards.

From there, the work turned outward: reviewing how other countries and regions — from the EU to ASEAN to the Common Ground Taxonomy — have approached similar challenges, and drawing out lessons that could realistically be adapted to Madagascar’s context. These insights fed into a genuinely collaborative design phase, where priority sectors, activities, and technical screening criteria were shaped together with local stakeholders, ensuring the taxonomy reflects Madagascar’s institutional and data realities — including its climate, biodiversity, and blue economy priorities — while remaining ambitious. The process also emphasized the need to make taxonomy criteria accessible to SMEs. 

Rather than finalizing the taxonomy on paper alone, the approach also tests it in practice: piloting the draft with financial institutions on real or pipeline transactions to understand how it performs in actual investment decisions. The lessons from this testing phase are feeding into a final, refined version of the taxonomy, complete with practical guidance to support its adoption and use by Madagascar’s financial sector.