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.
The partnership highlights the growing role of international technical assistance in helping African countries build sustainable finance systems. Across the continent, governments and financial regulators are increasingly exploring taxonomies, climate disclosure standards and green investment frameworks to mobilise private capital for infrastructure and economic transformation. For Cape Verde, the immediate application of the taxonomy is expected to have implications for critical sectors such as renewable energy and water management. The country has invested in expanding renewable energy capacity, particularly through wind and solar projects, as part of efforts to reduce dependence on imported fossil fuels and improve energy security.
Water security is another major economic priority. Limited freshwater resources and climate variability have placed pressure on agriculture, tourism and urban development. Investments that improve water efficiency, desalination capacity, wastewater management and climate adaptation infrastructure could become important areas for sustainable finance mobilisation under the new framework. The financial sector will play a central role in translating the taxonomy into economic impact. Banks and investors can use the classification system to identify eligible projects, assess environmental risks and develop financial products linked to sustainability objectives. This could support the growth of green lending, climate-related investment instruments and blended finance approaches.
The introduction of the taxonomy also aligns with broader African efforts to strengthen sustainable finance ecosystems. As countries seek to finance energy transitions, resilient infrastructure and climate adaptation, clear investment standards are becoming increasingly important for attracting domestic and international capital. However, implementation will depend on the capacity of institutions, businesses and financial actors to apply the framework effectively. Building technical expertise, ensuring data availability and maintaining alignment with evolving international standards will be important for the taxonomy’s long-term effectiveness.
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Cape Verde’s initiative demonstrates how smaller economies can use regulatory tools to address climate vulnerabilities while creating pathways for investment. By linking sustainability standards with financial decision-making, the country is positioning its energy and water priorities within a broader strategy for economic resilience and sustainable growth.
The finalisation and implementation of the sustainability taxonomy will determine how effectively Cape Verde can convert its climate ambitions into investable opportunities, while providing a potential model for other African economies seeking to mobilise finance for sustainable development.
