Singapore Taskforce Proposes Taxonomy for Identifying Green Activities

Green Finance Industry Taskforce taxonomy draws on EU approach, proposes traffic-light system for classification of activities.

Singapore’s GFIT (Green Finance Industry Taskforce) has issued a proposed taxonomy for Singapore-based FIs to identify activities that can be considered green or transitioning towards green.

GFIT, convened by the MAS (Monetary Authority of Singapore) and chaired by HSBC Singapore CEO Tony Cripps, is tasked with helping accelerate the development of green finance.

It comprises representatives from FIs, corporates, non-governmental organisations, and industry bodies including the ABS (Association of Banks in Singapore) and IMAS (Investment Management Association of Singapore).

The proposed taxonomy is set out in a new consultation paper, which seeks feedback on GFIT’s recommendations on over-arching environmental objectives and focus sectors.

The paper also proposes a “traffic-light” system which sets out how activities can be classified as green, yellow (transition), or red according to their level of alignment with environmental objectives.

The taxonomy draws on the theoretical underpinnings of the EU taxonomy and adapts them to the Asian context where relevant.

“Compared to other taxonomies, a key feature of the proposed taxonomy is that it encompasses transition activities that allow for a progressive shift towards greater sustainability while taking into account starting positions and supporting inclusive economic and social development,” MAS said.

In its next phase of work, GFIT will develop a combination of principle-based criteria and quantifiable thresholds for activities, to provide clarity and ease the implementation of the taxonomy by FIs.

The consultation on the proposed taxonomy, available here, is open for comments until 11 March 2021.

GFIT has also launched a best practices handbook for asset managers, banks, and insurers on implementing MAS’ Guidelines on Environmental Risk Management.

The guidelines were finalised in December. Asset managers, banks, and insurers are required to achieve full compliance by June 2022.

GFIT says it will work with industry associations to conduct workshops for FIs to help them strengthen their capabilities in environmental risk management.

In addition, GFIT is exploring technology solutions for FIs to enhance the quality of their climate-related disclosures, with an aim to pilot innovations that seek to solve current challenges in mobilising green finance across sectors.

The handbook is available here.

“Our goal to make Singapore the leading green finance hub in Asia rests strongly on close public-private partnership,” said MAS Managing Director Ravi Menon.

“With MAS setting the expectations for sound environmental risk management and the industry coming together with practical solutions on how to meet these expectations, we will develop a more climate-resilient and environment-friendly financial system.”

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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