Southeast Asian economies unveil plans for regional green taxonomy

Proposals for a taxonomy to cover Southeast Asian economies has been released today.   

A board convened by the 10-strong Association of South East Asian Nations (ASEAN) has unveiled its vision for a framework to define businesses that support the region’s transition to a low-carbon and sustainable economy – similar to those being developed in Europe and elsewhere.  

The ASEAN Taxonomy Board (ATB) was set up in March by the bloc’s Capital Markets Forum, insurance regulators, Senior Level Committee on Financial Integration and Working Committee on Capital Market Development. Today’s 87-page document outlines their thinking on an ASEAN-specific taxonomy that will “act as a map to help guide capital towards activities that can promote the transition of activities in the real economy onto a more sustainable footing”.  

The project would have no official regulatory mandate. It will be put to public consultation ahead of the publication of a first iteration.  

Several ASEAN countries, including Malaysia and Indonesia, are represented on the International Platform on Sustainable Finance, the global body seeking to align the various national and regional green taxonomies under development, to allow them to be compared and adopted easily by the financial markets. Thailand, Malaysia, Indonesia and Singapore are among those developing national taxonomies. 

The proposals issued by the ATB today appear to align with the EU’s green taxonomy – the current flagship global framework – by prioritising climate change, making provisions for activities that enable the climate transition, and requiring a Do No Significant Harm filter.  

However, there are hints that there will be some divergence, with the report downplaying the role of social considerations in an ASEAN taxonomy: the EU requires all green activities to meet certain ‘social safeguards’, whereas the ATB seeks to address “remedial efforts to transition”. 

Perhaps learning from the experience of the EU taxonomy, which is currently stuck at the centre of an embarrassing tug of war between different member states over the role of gas and nuclear in the energy transition, the ASEAN proposals rule out a single set of definitions for economies with individual policy and sustainability objectives.   

Instead, they suggest two layers – a ‘foundation framework’ and a ‘plus standard’ – in a bid to accommodate local contexts while establishing some regional consensus and comparability. 

The documents also outlines potential business activities to be classified as ‘red’ if a taxonomy for harmful activities is developed in future. They include coal or oil power without carbon capture, usage and storage; coal mining or oil extraction/refining/processing/production/associated supply chain infrastructure; and ships dedicated to transporting fossil fuels.  

Elsewhere, Russian development bank VEB.RF announced yesterday the official adoption of a national green taxonomy. In September, RI reported it had been signed off by Prime Minister Mikhail Mishustin.