Regulation (EU) 2020/852 and its technical delegated acts created the EU Taxonomy as an instrument for classifying sustainable activities. Formally, this framework applies to companies and financial products operating within the European Union. In practice, its influence extends well beyond European borders, notably via European DFIs that integrate it into their project appraisal processes.

This extension of influence has direct implications for project sponsors in Africa mobilising European financing. AFD, Proparco, BII, KfW, FMO, CDC, Norfund, SIFEM and other European DFIs progressively examine the projects they finance against the Taxonomy, either as an eligibility criterion for certain windows, or as a portfolio reporting element, or as a valuation criterion.

The application of European technical criteria to an African context nevertheless raises practical questions. The thresholds, methodologies and technical references were designed for European infrastructure with specific climatic, regulatory and economic conditions. Their transposition to African projects requires adjustments that the delegated acts themselves partially anticipate.

This article presents the activity categories most relevant to African projects, the applicable technical criteria by category, the contextual adaptations practised, the articulation with standard frameworks (IFC PS, AfDB OS, World Bank ESS), and the implications for project sponsors in Africa.

Activity categories particularly relevant to Africa

Among the dozens of activity categories covered by the Taxonomy, several are particularly relevant to infrastructure projects in Africa.

Renewable energy. Photovoltaic solar electricity, concentrated solar thermal, onshore and offshore wind, hydroelectricity (with strict conditions), geothermal, bioenergy (with conditions on biomass sustainability). The technical criteria specify for each technology the life-cycle emission thresholds, environmental impact conditions, social acceptability rules.

Electricity networks. Transmission and distribution infrastructure, necessary for the integration of renewable energy. The criteria concern the share of low-carbon electricity in the served mix.

Transport. Rail passenger and freight transport (contribution criteria aligned with direct emissions), road transport (more restrictive criteria focused on zero-emission vehicles), maritime and river transport (with specific criteria according to propulsion technologies).

Water and sanitation management. Collection, treatment, distribution of drinking water, wastewater treatment, stormwater management, sanitation services. The criteria concern energy efficiency, quality of services provided, impacts on aquatic environments.

Buildings. New construction with high energy performance, significant energy renovation, acquisition of efficient buildings. The criteria are based on certifications or energy performance thresholds.

Climate adaptation. A cross-cutting category covering activities that contribute substantially to climate change adaptation, applicable to many sectors via specific criteria.

These categories cover a significant share of infrastructure projects likely to be financed in Africa by European DFIs.

The four cumulative conditions applied to the African context

For an activity to be recognised as taxonomy-aligned, four cumulative conditions must be satisfied. The application of these conditions to an African context raises specificities.

Substantial contribution to at least one environmental objective. This condition is generally the easiest to satisfy for an eligible project: a solar farm in Africa contributes substantially to climate change mitigation, as it would in Europe. The technical threshold criteria (life-cycle carbon intensity, energy performance) apply in the same way.

The Do No Significant Harm (DNSH) principle. It is often on this condition that African specificities manifest. The DNSH criteria on water, biodiversity, soil, are defined by reference to European regulations (framework directives on water, on habitats) that do not have strict equivalents in all African countries. Application then requires an assessment against internationally applicable best practices, typically the IFC Performance Standards or the IFC Environmental, Health and Safety Guidelines.

Minimum social safeguards. Defined by reference to the UN Guiding Principles, OECD Principles, ILO Fundamental Conventions, the Charter of Human Rights, these safeguards have universal application. In the African context, they mobilise the same frameworks as for European projects.

Compliance with technical screening criteria. The technical criteria were designed based on European data. Their application to Africa may require adaptations: different emission factors of national electricity mixes, climatic conditions that modify the relevance of certain thresholds, availability of local technologies that conditions applicable alternatives.

Contextual adaptations practised by European DFIs

Faced with the specificities of the African context, European DFIs have developed several adaptation approaches.

Use of local thresholds where they exist. For building energy performance for example, the European reference can be replaced by an equivalent national reference (South African SANS certification, francophone frameworks, internationally recognised local certifications).

Substitution by international best practices. For DNSH criteria without direct national equivalent, DFIs mobilise the IFC PS, the IFC EHS Guidelines, the Performance Standards criteria. This substitution is recognised by the Taxonomy logic, which explicitly cites these frameworks as acceptable references.

Adjustment of technical factors. For solar or wind carbon intensity thresholds, calculations take account of the electricity mix of the country of implementation. A solar farm displacing coal thermal production has a different impact from a solar farm added to an already predominantly hydraulic mix.

Documentation of equivalence. Rather than imposing literal compliance with European criteria, DFIs request a documented demonstration that the project respects the Taxonomy objectives despite local specificities. This demonstration is examined on a case-by-case basis.

These adaptations are not official in the sense of the European regulation, but they constitute the established practice of European DFIs in their assessments.

Articulation with IFC PS, AfDB OS and World Bank ESS

For a project sponsor in Africa, the EU Taxonomy does not substitute for the standard DFI frameworks. It articulates with them.

The IFC PS remain the main technical reference for environmental and social due diligence. The Environmental and Social Management Plan, the Resettlement Action Plan, the Stakeholder Engagement Plan, are constructed according to the PS. The Taxonomy is superimposed as a sustainability classification tool.

The practical advantage: the elements produced for PS compliance (ESIA, biodiversity studies, climate assessments) largely serve to document the Taxonomy DNSH criteria. A rigorous ESMP de facto covers the main dimensions expected by the DNSH.

The complementarity: the Taxonomy imposes a perspective of substantial contribution to an environmental objective, which is not necessarily at the heart of the PS. A project can comply with the PS without being taxonomy-aligned (for example, a standard infrastructure project whose impacts are managed but which does not contribute substantially to the ecological transition).

To optimise the work, best practice consists of organising project documentation starting from the PS (most complete technical foundation), then adding the specific elements required by the Taxonomy: argumentation on substantial contribution, DNSH validation, proof of minimum social safeguards.

Implications for project sponsors in Africa

Five practical implications emerge for project sponsors mobilising European DFIs.

Anticipate the taxonomy assessment. Even if the Taxonomy is not strictly mandatory for an African project, it is increasingly considered. Conducting the assessment from the studies phase allows identification of possible adjustments that would make the project alignable.

Document the substantial contribution carefully. The contribution to climate mitigation, adaptation, or other objectives, must be demonstrated with quantitative elements (avoided emissions, improved resilience, volumes treated). Qualitative statements alone do not suffice.

Produce a structured DNSH analysis. Even if national references differ, the demonstration of no significant harm to the five other objectives must be structured, documented, aligned with internationally applicable best practices.

Work on minimum social safeguards. This aspect, sometimes neglected in standard infrastructure projects, is important for the Taxonomy. Alignment with UN Guiding Principles, OECD, ILO, must be attested, with documented practices on human rights, labour, due diligence.

Articulate with other frameworks. A multi-lender project may be subject to several frameworks (IFC PS for a co-financier, Taxonomy for a European DFI, other frameworks according to partners). Harmonisation of documentation avoids costly duplications.

Developments to anticipate

The EU Taxonomy framework continues to evolve. Several developments merit monitoring.

Additional delegated acts. The four objectives other than climate (water, circular economy, pollution, biodiversity) received their delegated acts in 2023 and are being deployed. Further clarifications will follow.

Geographical extension. Several jurisdictions outside the European Union are developing their own taxonomies, sometimes inspired by the EU Taxonomy but with local adaptations. ASEAN, South Africa, Colombia, Singapore, have produced their texts. Progressive international convergence is emerging.

Regulatory integration. The Taxonomy is progressively integrated into other European texts: CSRD, green bond regulations, financial product marketing rules. Associated obligations are tightening.

Possible mutual recognition. Discussions are emerging on mutual recognition between taxonomies from different jurisdictions. Partial technical convergence will facilitate international transactions in due course.

What European DFIs examine in a taxonomy assessment.

  • Precise identification of the activity category according to applicable delegated acts.
  • Demonstration of substantial contribution with quantitative elements.
  • DNSH assessment on the five other objectives, adapted to the local context.
  • Documented minimum social safeguards.
  • Consistency between the taxonomy assessment and other project deliverables (ESIA, ESMP).
  • The project's overall climate ambition, beyond the mere binary classification.

The EU Taxonomy, although designed for the European Union, has become an unavoidable framework for African projects financed by European DFIs. Its application requires contextual adaptations that are not trivial, but which are practicable provided rigorous documentation.

For a project sponsor in Africa, the right strategy consists of integrating the taxonomy assessment into the overall project structuring approach, alongside the standard lender frameworks. This integration, conducted upstream, avoids surprises and facilitates access to financing from European DFIs.

Investment in mastering this framework pays off rapidly: it gives access to specific financing windows, improves project valuation in lender portfolios, and builds competence that will be increasingly sought after as other jurisdictions deploy their own taxonomies.

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