Singapore’s Green Finance Industry Taskforce Launches Final Consultation on Green and Transition Taxonomy | Latham & Watkins LLP

The consultation seeks opinions on its “measures-dependent approach” to classifying industrial actions, as well as “Do No Sizeable Harm” requirements.


The Green Finance Marketplace Taskforce (GFIT) was convened by the Financial Authority of Singapore (MAS) and consists of representatives from money establishments, corporates, and monetary sector associations, among the other stakeholders. The business-led team aims to accelerate the growth of inexperienced finance in Singapore as a result of 4 initiatives:

  1. Developing a taxonomy
  2. Boosting environmental risk administration tactics of fiscal establishments
  3. Bettering disclosures
  4. Fostering environmentally friendly finance alternatives

Taxonomy Proposal

In January 2021, GFIT proposed a taxonomy for Singapore-based mostly economic institutions to increase transparency amongst money marketplace individuals and stakeholders, cut down the possibility of greenwashing, and development Singapore’s web zero ambition.

An first consultation sought opinions on the taxonomy’s wide solution, including a new “traffic light” classification procedure. This classification differentiates concerning activities’ contribution to local climate modify mitigation:

  • Inexperienced (environmentally sustainable) — functions contributing considerably to local climate alter mitigation
  • Amber (transition) — pursuits transitioning towards eco-friendly, or people facilitating important emissions reductions[1]
  • Crimson (hazardous) — activities at present incompatible with a web zero trajectory

For this phase of function, criteria and thresholds for economic functions are focussed on the contribution to weather adjust mitigation. However, other environmental targets may possibly be additional in future developments.

The second consultation, executed in May possibly 2022, expanded on the targeted visitors light-weight technique, adding granularity to the application and thresholds for classification.

Last Consultation

On 15 February 2023, GFIT launched a closing session paper, looking for views on the in-depth thresholds and criteria used for classification of eco-friendly and amber activities across 5 sectors[2].

A notable proposal of the third session is adopting a “measures-centered approach” for the industrial sector. This is because of to the issue in determining science-based mostly metrics and thresholds for the “amber” group as the technological methods to obtain net zero continue to be unsure. The proposed “measures-based mostly approach” needs the creation course of action of industrial uncooked resources to adopt a range of emissions reduction steps to be regarded as “amber” actions under the taxonomy.

“Do No Considerable Harm” Conditions

The session also seeks views on the “Do No Important Harm” (DNSH) criteria[3]: specifying that pursuits that add to local climate alter mitigation should not result in important adverse impression to the other four environmental targets of the taxonomy: (1) local weather improve adaption, (2) protection of ecosystems and biodiversity, (3) endorsing resilience and circular overall economy, and (4) air pollution prevention and command.

For case in point, in the energy sector, the installation of photovoltaic panels may perhaps satisfy the threshold to be an environmentally sustainable activity underneath the objective of local climate improve mitigation. Nevertheless, the installation process could pose possible chance to ecosystems and biodiversity if the panels had been created in a selected conservation region, which would go in opposition to environmental objective (2). The DNSH would involve corporations to take into account and assess the other environmental impacts relevant to the activity (like protection of ecosystems and biodiversity), possibly such as an Environmental Affect Assessment and mitigation actions to safeguard biodiversity.

The DNSH assessment sets out specific actions across eight sectors which the taxonomy addresses (like power, waste, transport, and construction). It also considers the possible added environmental impacts that companies need to have to evaluate. In total, these eight sectors add to approximately 90{1668a97e7bfe6d80c144078b89af180f360665b4ea188e6054b2f93f7302966b} of greenhouse gas emissions in South East Asia.

Interoperability With Other Taxonomies

GFIT has said that the Singapore taxonomy is drafted with the intention to be reliable with other taxonomies to make sure interoperability, in individual the EU Taxonomy and ASEAN Taxonomy.

One notable variation concerning the GFIT taxonomy and its EU counterpart is the “traffic light” system, which is not a aspect of the EU Taxonomy (which in its place operates in a binary style). GFIT hopes that this function, which is constant with the ASEAN Taxonomy, will make it possible for for a progressive shift to a net zero outcome throughout distinct sectors.

However, the EU Taxonomy does supply that the European Commission should provide a report on the probable extension of the Taxonomy previous its present-day binary technique. In 2022, the EU’s specialized skilled group functioning on the EU Taxonomy released proposals for this kind of an extension. The proposal involved equally the idea of “amber” routines as well as added categories, which include things to do with a commonly minimal environmental effects and two distinctive varieties of actions that bring about sizeable damage. At the time of creating, the Fee has not still formally adopted these proposals.

Future Steps

GFIT will publish the final taxonomy by the end of Q2 2023, getting into account all consultation opinions. Firms can post feedback on the 3rd session as a result of the Affiliation of Financial institutions in Singapore by 15 March 2023[4].

Latham & Watkins will carry on to watch developments in this area.

This weblog submit was ready with the aid of Samantha Banfield.


[1] This classification does not apply to any new initiatives or infrastructure, and the transitioning time period is not to be used indefinitely — an activity should really be pursuing an discovered pathway to internet zero.

[2] The 5 appropriate sectors are (i) agriculture and forestry / land use (ii) industrial (ii) squander and drinking water (iv) information and facts and communications engineering and (v) carbon seize and sequestration.

[3] DNSH Requirements

[4] Submission of feedback for 3rd GFIT Session

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