Industry Taskforce launches Third Consultation on Green and Transition Taxonomy
Singapore, 15 February 2023… The Green Finance Industry Taskforce
a. agriculture and forestry/land use;
b. industrial;
c. waste and water;
d. information and communications technology; and
e. carbon capture and sequestration.
2. A key proposal of this public consultation is the adoption of a “measures-based approach” for the industrial sector. Unlike other sectors, for the industrial sector, there is a lack of certainty around the technological solutions to achieve net zero. This makes it difficult to determine science-based metrics and thresholds for the “amber” category based on the emissions performance of the activity. In lieu of this, a “measures-based approach” is proposed, which requires the production process of the industrial raw materials to adopt a range of emissions reduction measures. For example, in cement manufacturing, the amber category in the taxonomy provides a list of decarbonisation measures or retrofitting plans which should be put in place to support better energy efficiency outcomes.
3. GFIT has adopted a traffic light classification system to differentiate an activity’s contribution to climate change mitigation, one of five environmental objectives
a. A green classification represents activities that contribute substantially to climate change mitigation that is consistent with a net zero outcome, or are on a pathway to net zero by 2050.
b. An amber classification represents transition activities, including those that are either transitioning towards green within a certain time frame, or enabling significant emissions reductions in the short term.
c. A red classification represents harmful activities that are not currently compatible with a net zero trajectory.
4. GFIT is also seeking views on the “Do No Significant Harm (DNSH)” criteria. The criteria specifies that activities which are making a substantial contribution to climate change mitigation should not be carried out in a manner that would cause significant adverse impact to the other four EOs under the taxonomy. To illustrate, the construction of a hydropower generation facility may have met the thresholds and criteria to be classified as a green activity under the climate change mitigation EO. The DNSH criteria would additionally require that the construction and operation of the facility not result in significant adverse impact to the environmental ecosystem within the vicinity of the facility, and the facility owner has to demonstrate that practical measures will be put in place to mitigate any adverse impact.
5. This third consultation builds on GFIT’s two earlier rounds of consultations in January 2021
6. Ms Gillian Tan, Chief Sustainability Officer and Assistant Managing Director (Development and International), MAS, said, “The GFIT taxonomy will drive financing flows to catalyse Asia’s transition to net zero. Adapting international best practices for use in Asia, the taxonomy’s extensive activity and emissions coverage will encourage Singapore-based financial institutions to direct capital flows towards green and transition activities, thereby guiding the region’s transition to a low carbon future.”
7. Interested parties may submit their feedback through the Association of Banks in Singapore through this link by 15 March 2023.
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