The Monetary Authority of Singapore (MAS), the central bank and financial regulator of Singapore, announced today the launch of the Singapore-Asia Taxonomy for Sustainable Finance, aimed at defining green and transition economic activities contributing to a series of environmental and climate-related objectives, enabling the identification and allocation of capital to sustainable projects and initiatives.
The new taxonomy also aims to reduce “green or transition washing” risk, according to MAS, by enabling financial institutions to identify and disclose the alignment of their financed activities and labelled investment products.
The taxonomy covers activities across eight focus sectors, with technical screening criteria for each, which combine to represent 90% of the region’s emissions. Sectors covered by the taxonomy include Energy, Real Estate, Transportation, Agriculture and Forestry/Land Use, Industrial, Information and Communication Technology, Waste/Circular Economy, Carbon Capture and Sequestration.
The launch marks the latest in a series of initiatives across jurisdictions to set up a classification system for the definition of sustainable economic activities, including taxonomy systems already established or in development in the EU, UK and Australia.
The Singapore-Asia Taxonomy will be the first to introduce a “transition” category, and includes a “traffic light” system, aimed at enabling users to distinguish between Green, Amber – or transition – and ineligible activities. Green activities under the new system use criteria based on the EU Taxonomy, with some adaptation for regional circumstances, while Amber activities include those that are not yet on a 1.5°C pathway, but are either moving towards a green transition pathway within a defined timeframe, or facilitating significant emissions reductions in the short term with a prescribed sunset date.
The taxonomy also introduces a “measures-based approach” aimed at facilitating a sustainable transition by encouraging investment into decarbonization measures that will support reductions in emissions intensity of activities, to meet green criteria over time.
According to the MAS, the introduction of a definition for transition activities is particularly relevant for Asia, which is balancing a shift towards net zero with economic development, population growth, and rising energy demands.
MAS Managing Director Ravi Menon said:
“This is the first taxonomy in the world to comprehensively define transition activities across eight focus sectors. Most taxonomies define what is green and what is brown, leaving out the bulk of economic activities that are in-between.”
The launch of the Singapore-Asia Taxonomy follows a series of public consultation rounds, and collaboration with the Green Finance Industry Taskforce (GFIT), an industry-led initiative convened by MAS focused on sustainable finance initiatives.
GFIT Chair and HSBC Singapore CEO Wong Kee Joo said:
“The Singapore-Asia Taxonomy takes an Asian perspective and offers a measures-based approach to defining transition activities, categorising them as “amber”. This framework aims to help financial institutions optimise their support for the transition of hard-to-abate sectors, particularly in Asia.”
Click here to access the new Singapore-Asia Taxonomy.