Proposed traffic light-based taxonomy is accompanied by a user guide for financial institutions and companies.
Singapore’s GFIT (Green Finance Industry Taskforce) has issued a second consultation on its proposed taxonomy, which uses a traffic-light system to classify economic activities.
The consultation follows the January 2021 release of a proposed framework for a green taxonomy for Singapore-based financial institutions by GFIT, a multi-stakeholder group convened by MAS (Monetary Authority of Singapore) to accelerate the development of green finance in the city-state.
The new consultation builds on GFIT’s earlier proposed taxonomy, detailing thresholds and criteria for economic activities in the energy, transport, and real estate sectors. These three sectors are part of the eight focus sectors that collectively account for close to 90% of ASEAN greenhouse gas emissions.
GFIT aims to release the criteria and thresholds for the remaining five sectors for public consultation in late 2022, and finalise the full taxonomy in 2023.
The proposed thresholds and criteria can be used to classify an economic activity as green, amber, or red, using a traffic light system, to differentiate its contribution to climate change mitigation.
- A green classification represents activities that contribute substantially to climate change mitigation by operating at net zero, or are on a pathway to net zero by 2050.
- An amber classification represents transition, and includes activities that are either transitioning towards green within a certain time frame, or facilitating significant emissions reductions in the short term.
- A red classification refers to harmful activities that are not currently compatible with a net zero trajectory.
“It is envisaged that the taxonomy will serve as a powerful tool to redirect capital flows towards sustainable activities and away from unsustainable ones,” the consultation paper says. The goal is to ensure the taxonomy is interoperable with other regional and national taxonomies, particularly the EU Taxonomy and the ASEAN Taxonomy.
The proposed taxonomy is accompanied by a user guide for financial institutions and companies to apply the taxonomy. It includes detailed guidance on the reporting of a company’s revenue, capital expenditures and operating expenditures that are aligned with the taxonomy criteria.