With a taxonomy, a borrower could want to fund a particular type of activity. The taxonomy would list the various criteria. If an activity is included among those aligned with net zero and labelled as green, that funding could essentially be labelled and sold to investors as a green product. There would be certain assurances. During the borrowing mechanism, it would give the investor assurances that the activity is green.
In the absence of a taxonomy, the borrower would go to their financial institution and seek funding. The financial institution might suggest that it be sold to particular investors who might be inclined to invest in green activities, but it couldn't make that assurance. There's a lack of credibility.
It's essentially a common set of terms and definitions that could be shared among the borrower, the financial institution and the ultimate investor.