25 February 2021

On 28 January 2021, the Green Finance Industry Taskforce (“GFIT”), convened by the Monetary Authority of Singapore (“MAS”), issued a proposed taxonomy for Singapore-based financial institutions to identify activities that can be considered green or transitioning towards green. The GFIT taxonomy consultation paper is available on the website of the Association of Banks in Singapore (“ABS”). The consultation closes on11 March 2021.

GFIT also launched a Handbook on Implementing Environmental Risk Management (“Handbook”) for asset managers, banks, and insurers.

GFIT comprises representatives from financial institutions, corporates, non-governmental organisations and financial industry associations. GFIT’s mandate is to help accelerate the development of green finance by (a) developing a taxonomy, (b) enhancing environmental risk management practices of financial institutions, (c) improving disclosures, and (d) fostering green finance solutions.

Consultation on green and transition taxonomy

The consultation paper sets out a taxonomy for Singapore-based financial institutions to identify and classify activities that can be considered green or in transition. 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.

Feedback is sought on GFIT’s recommendations on the environmental objectives, focus sectors, and a “traffic-light” system setting out how activities can be classified as green, yellow (transition) or red according to their level of alignment with environmental objectives. The taxonomy references international best practices and adapts them to the Asian context where relevant.

Handbook on implementing environmental risk management

The Handbook provides guidance to banks, insurers, and asset managers on best practices in environmental risk management. It will support the financial industry’s efforts to implement MAS’ Guidelines on Environmental Risk Management.

GFIT states that it will work with industry associations to conduct workshops for financial institutions to help strengthen their capabilities in environmental risk management. Other projects include exploring technology solutions for financial institutions to enhance the quality of their climate-related disclosures and piloting innovations that seek to solve existing challenges in mobilising green finance across sectors. These resources will complement the taxonomy and Handbook.

Reference materials

The following materials are available on the the MAS website www.mas.gov.sg and ABS website www.abs.org.sg: