MAS Introduces World’s First Multi-Sector Transition Taxonomy

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The Monetary Authority of Singapore (MAS) has unveiled the Singapore-Asia Taxonomy for Sustainable Finance, a pioneering initiative globally. The taxonomy establishes detailed thresholds and criteria to define green and transition activities, focusing on eight key sectors, offering clarity amid the progressive shift towards a net-zero economy in Asia.

Notably, the Singapore-Asia Taxonomy introduces the novel concept of a “transition” category, addressing the region’s unique dynamics. Transition activities are defined through a traffic light system, distinguishing between green, transition, and ineligible activities. “Transition” signifies activities not meeting current green thresholds but aligning with net-zero goals, emphasizing the trajectory towards a 1.5°C outcome, with transition thresholds having a sunset date.

Additionally, a “measures-based approach” encourages capital investments in decarbonization measures, aiming to reduce emissions intensity over time. This approach aids in differentiating between activities genuinely contributing to sustainability and those engaging in greenwashing.

The taxonomy’s significance is underscored in sectors facing challenges in emissions reduction due to technological constraints, such as the maritime sector. The introduction of amber thresholds recognizes vessels aligned with industry targets to achieve net-zero emissions by 2050. This accommodates sectors where achieving immediate “green” thresholds is technically challenging.

Addressing the critical aspect of coal phase-out, the taxonomy provides a credible framework for the early retirement of coal-fired power plants. It outlines criteria at both entity and facility levels, ensuring alignment with a 1.5°C scenario and emphasizing just transition plans.

Furthermore, the MAS is actively working on interoperability with global taxonomies, initiating efforts to map the Singapore-Asia Taxonomy to the International Platform for Sustainable Finance’s Common Ground Taxonomy (CGT). This mapping will provide a common set of definitions, facilitating aligned financing solutions and promoting sustainable development across regions.

Ravi Menon, Managing Director of MAS, emphasized the Singapore-Asia Taxonomy’s significance, being the first to define credible transition activities. The taxonomy covers 90% of the region’s greenhouse gas emissions, providing a comprehensive guide for capital allocation into green and transition activities. Wong Kee Joo, Chairman of Green Finance Industry Taskforce (GFIT), acknowledged the taxonomy’s impact and its contribution to Singapore’s leadership in sustainable finance.

The Singapore-Asia Taxonomy, developed through extensive industry-led collaboration and four rounds of public consultations, will undergo periodic reviews to stay abreast of emerging advancements in science and technology. This initiative is poised to play a pivotal role in shaping sustainable finance in the Asian region.