Singapore’s sustainable finance industry association, backed by the Monetary Authority of Singapore (MAS), has released additional guidance to help financial institutions apply the Singapore-Asia Taxonomy in structuring green and transition financing.
The new guidance, published by the Singapore Sustainable Finance Association (SSFA), offers direction on referencing the taxonomy for business activities that are not yet fully aligned with its criteria. This includes cases where misalignment stems from factors beyond a borrower’s control or where enabling assets and supporting value-chain activities are not explicitly listed in the taxonomy.
In such instances, financiers may still consider funding these projects under green or transition financing frameworks—provided the projects can become compliant by a designated “sunset date,” or are expected to significantly reduce greenhouse gas emissions in the short term. Sunset dates refer to fixed deadlines by which transition activities, classified as “amber” under the taxonomy, are expected to become green.
Singapore’s taxonomy uses a traffic light classification system: green for environmentally sustainable activities, amber for transition-related activities, and red for those considered harmful to the climate. Finalised in December 2023 after extensive consultation, it is considered the first global taxonomy to define clear criteria for transition activities.
The guidance also addresses how banks should proceed in the absence of sufficient data on transition activities, encouraging the use of forward-looking screening approaches. “The SSFA hopes this publication will promote broader adoption of the Singapore-Asia Taxonomy and reinforce sustainable finance practices across the region,” the association said in a statement.
