The Monetary Authority of Singapore (MAS) launched the Singapore-Asia Taxonomy for Sustainable Finance (Singapore-Asia Taxonomy) which sets out detailed thresholds and criteria for defining green and transition activities that contribute to climate change mitigation across eight focus sectors.
The Singapore-Asia Taxonomy advocates the concept of a “transition” category, which is the recognition of the need to properly contextualize “transition” for the Asian region. A traffic light system that defines green, transition, and ineligible activities across the eight focus sectors. “Transition” refers to activities that do not meet the green thresholds now but are on a pathway to net zero or contributing to net zero outcomes. To signal the importance of progression towards a 1.5 degree Celsius (1.5°C) aligned outcome, transition thresholds do not last indefinitely and have a sunset date.
Defining credible transition thresholds is especially pertinent to sectors that find it challenging to reduce emissions and meet a 1.5°C aligned outcome due to current technological constraints. For example, in the maritime sector, zero or low-carbon fuels are still in a nascent stage of technological evolution, and it is challenging for vessels to achieve the zero-emissions required to meet “green” thresholds. The introduction of amber thresholds caters to vessels that are aligned with industry targets under the 2023 International Maritime Organization Greenhouse Gas Strategy to reach net-zero emissions by or around 2050, which sets intermediate targets of reducing emissions by at least 20% and striving for 30% by 2030 compared to 2008 levels.
To enhance interoperability with global taxonomies, MAS has commenced an exercise to map the Singapore-Asia Taxonomy to the International Platform for Sustainable Finance (IPSF)’s Common Ground Taxonomy (CGT), which currently covers the EU Taxonomy and People Bank of China’s (PBOC) Green Bond Endorsed Project Catalogue. When this mapping is complete, financial institutions and market participants will be able to refer to a common set of definitions under the CGT, which would help increase taxonomy-aligned financing solutions and facilitate sustainable development in markets that the CGT covers.
The taxonomy is industry-led and draws extensively on the experience of financial institutions and real economy players engaged in transition activities in the region. Moreover, the framework aims to help financial institutions optimize their support for the transition of hard-to-abate sectors, particularly in Asia. The Singapore-Asia Taxonomy will be reviewed periodically to keep pace with emerging science and technology improvements.
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