The Monetary Authority of Singapore (MAS) has called for market feedback on a new national green finance taxonomy, identifying eligible environmentally sustainable and climate transition activities.
The framework was developed by the newly-established Green Finance Industry Taskforce (GFIT), a committee convened by MAS – Singapore’s de facto central bank – and tasked to “accelerate the development of green finance” in the island state.
The proposals set out four environmental objectives for green financing: climate change mitigation and adaptation, protection of biodiversity and resource resilience. Economic activities will be assessed for their alignment with these objectives under a ‘traffic-light’ system; with green, yellow and red indicating environmentally sustainable, transition and unsustainable activities respectively.
The consultation document cites the EU’s green taxonomy – a detailed and complex framework that has been under development in Europe since 2018 – as a “key reference”. Both taxonomies utilise similar over-arching environmental objectives, sector-specific guidance and a ‘Do No Significant Harm’ clause for eligible activities.
GFIT also referenced green taxonomies which are currently being developed by close neighbours Malaysia and China, although it noted that they were less granular and prescriptive than the EU’s taxonomy.
The current consultation will end on March 11. Next, GFIT will propose principles-based criteria and detailed technical thresholds for assessing taxonomy-alignment.
GFIT is chaired by HSBC Singapore CEO Tony Cripps, and comprises representatives from financial institutions, corporates and trade bodies including Aviva, BlackRock, Deutsche Bank, MUFG, Standard Chartered, commodity trader Trafigura and sovereign fund Temasek. It does not appear to include any representatives from environmental NGOs and campaign groups.
The group has appointed leads for work streams such as taxonomy development, disclosures and green finance solutions.
GFIT has separately issued a handbook establishing best practices for environmental risk management by banks, insurers and asset managers. The resource provides guidance for financial institutions which will soon be required to comply with new supervisory expectations on disclosure, climate scenario analysis and client engagement.
This is not MAS’s first foray into sustainable finance. In 2017, the supervisor launched its Sustainable Bond Grant Scheme which provides subsidies for the issuance of green, social, sustainability and sustainability-linked bonds in Singapore. The programme is valid until May 2023.