MAS Unveils World’s First Multi-Sector Transition Taxonomy, Paving the Way for Sustainable Finance Innovation

The Monetary Authority of Singapore (MAS) has introduced the Singapore-Asia Taxonomy for Sustainable Finance, a pioneering framework globally. The taxonomy outlines detailed thresholds and criteria for defining green and transition activities across eight key sectors, including Energy, Real Estate, Transportation, Agriculture, Industrial, and others. Notably, it is the first global taxonomy to introduce a “transition” category, acknowledging the unique challenges in Asia’s shift towards a net-zero economy.

The taxonomy employs a traffic light system and a measures-based approach to define transition activities. The former categorizes activities as green, transition, or ineligible, while the latter encourages capital investments in decarbonization measures to eventually meet green criteria. This is crucial for sectors facing challenges in emission reduction due to technological constraints, such as the maritime sector.

Additionally, the Singapore-Asia Taxonomy addresses the early phase-out of coal-fired power plants, providing criteria aligned with a 1.5°C scenario to ensure credibility in the energy transition. The framework also aims for interoperability with global taxonomies by mapping to the International Platform for Sustainable Finance’s Common Ground Taxonomy, promoting cross-border financing flows.

MAS Managing Director Ravi Menon emphasized the significance of the taxonomy, stating that it provides credible definitions for transition activities and covers sectors responsible for 90% of the region’s greenhouse gas emissions. The taxonomy is industry-led, drawing on the experience of financial institutions and real economy players and has undergone four rounds of public consultations. MAS plans periodic reviews to stay aligned with emerging science and technology advancements.

Source: Monetary Authority of Singapore