Transition Credits

Accelerating the retirement of coal-fired power plants (CFPPs) is particularly relevant in the region; the CFPPs account for about a third of Asia’s greenhouse gas emissions. If these plants operate as planned, they will exhaust about two-thirds of the carbon budget that we have remaining to keep the rise in global temperatures from increasing to within 1.5 degrees Celsius. However, phasing out coal is particularly challenging for Asia, given the scale of coal power in the region, the downstream impact of phasing out coal, and the young age of Asia’s coal plants.

In September 2023, MAS and McKinsey & Company jointly published a working paper setting out how high-integrity carbon credits (termed as “Transition Credits”), arising from the emissions reduced through retiring a CFPP early and replacing with cleaner energy sources, can be utilised as a complementary financing instrument to accelerate and scale the early retirement of CFPPs. The credits must be aligned with globally recognised standards such as the Core Carbon Principles (CCPs) set out by the Integrity Council of Voluntary Carbon Market (ICVCM) and other Article 6 integrity requirements, as mandated by the United Nations Framework Convention on Climate Change (UNFCCC). MAS will explore ways for transition credits to align with the CCPs, in consultation with the ICVCM.

A whole-of-system approach is needed to develop transition credits into a viable market solution. To achieve this, MAS:

• Launched the Transition Credits Coalition (TRACTION) to identify system-wide barriers and develop solutions for transition credits to be utilised as a credible financing instrument. TRACTION comprises about 30 members and knowledge partners across key stakeholder groups from carbon credit services, energy financing, project development, risk management and non-governmental organisations. TRACTION is looking into three areas to scale transition credits: (i) enabling a supply of high-integrity transition credits; (ii) developing a toolkit of solutions to enhance the replicability of transition credit transactions; and (iii) building investor confidence in transition credits.

• Announced two pilot projects to test the practicality of different approaches in integrating high-quality transition credits in the early retirement of CFPPs. This is in collaboration with (i) ACEN Corporation and Coal-to-Clean Credit Initiative, to accelerate the retirement of the South Luzon Thermal Energy Corporation coal plant in Philippines. Climate Smart Ventures, an advisory firm focused on energy transition, will be coordinating the project; and (ii) Asian Development Bank (ADB), which is advising the Government of Philippines over the retirement of a coal plant in Mindanao under its Energy Transition Mechanism. Based on early estimates, the transition credits could help bring forward the retirement of these two coal plants by at least 5 years, translating to a reduction of more than 3 million tonnes of carbon emissions per year.

• More information on Transition credits 
• Speech by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, delivered on 3 December 2023, at the COP28 Singapore Pavilion Finance Day on "Getting Transition Finance Right"
• Speech by Mr Chia Der Jiun, Managing Director, Monetary Authority of Singapore, delivered on 17 April 2024, at the Financing Asia’s Transition (FAST) Conference on ”Financing Asia’s Transition – Bridging Global Ambition to Regional Action and Impact”
• Video on presentation and updates by ACEN Corporation, ADB and The Rockefeller Foundation on the pilot projects, at the Financing Asia’s Transition (FAST) Conference (17 Apr 2024)  

Singapore-Asia Taxonomy

The Singapore-Asia Taxonomy is the first taxonomy globally to pioneer the concept of a “transition” category. This recognises the need to properly contextualise “transition” for the Asian region. Transition activities are comprehensively defined through two new approaches: One, a traffic light system that defines green, transition, and ineligible activities across the focus sectors; Two, a “measure-based approach” that seeks to encourage capital investments into decarbonisation measures or processes that will help to reduce the emissions intensity of activities and enable the activities to meet the green criteria over time.

To facilitate the credible financing of the managed phase out of coal power in the region, the Taxonomy sets out both entity and facility-level criteria that are aligned to a 1.5 degrees Celsius scenario. Such criteria include that the electricity generated from the phased-out CFPP has to be fully replaced with clean energy within the same electricity grid and the coal plant needs to have a just transition plan.

Additionally, to enhance interoperability with global taxonomies, MAS has commenced an exercise to map the Singapore-Asia Taxonomy to the International Platform for Sustainable Finance (IPSF)’s Common Ground Taxonomy (CGT), which currently compares the EU Taxonomy and People’s Bank of China (PBOC)’s Green Bond Endorsed Project Catalogue. The CGT mapping exercise is a workstream under the Singapore-China Green Finance Taskforce, and is intended to support more cross-border sustainable financing solutions that are aligned with the Singapore-Asia Taxonomy and CGT.  

• MAS Media Release, published on 3 December 2023, on MAS Launches World’s First Multi-Sector Transition taxonomy
• MAS Media Release, published on 21 April 2023, on Singapore and China Establish Green Finance Taskforce to Strengthen Collaboration in Green and Transition Finance

ASEAN Taxonomy

MAS is a board member of the ASEAN Taxonomy Board (ATB) and continues to support the development of the ASEAN taxonomy. The ATB has made progress and published Version 2 in March 2023 which provides guidance for assessing an activity using the Foundation Framework principles-based guiding questions as well as technical screening criteria (TSCs) for activities under the Energy, Carbon Capture, and Utilisation and Storage enabling sectors. ATB further published Version 3 for consultation on 27 March 2024, which introduced TSCs for two more sectors: Transportation and Storage, as well as Construction and Real Estate. 

Financing Asia's Transition - Partnership (FAST-P)

FAST-P is a blended finance initiative done in collaboration with key public, private, and philanthropic sector partners. It aims to mobilise up to US$5 billion to de-risk and finance transition and marginally bankable green projects in Asia. FAST-P brings together stakeholders including multi-lateral development banks, sovereign partners, philanthropic organisations, and financial institutions to support Asia’s decarbonisation, narrow the financing gap through the mainstreaming of blended finance, and support economic growth and climate resilience in Asia. 

During COP28, MAS signed two Memoranda of Understanding (MOUs) with partners:

Green Investments Partnership

• MAS, together with Allied Climate Partners, International Finance Corporation, and Temasek, signed an MOU to bridge gaps in the region's sustainable infrastructure financing needs through the deployment of blended finance to finance marginally bankable green projects that would otherwise not be commercially viable on their own.

• The partnership aims to identify and develop a pipeline of investments in marginally bankable green infrastructure including Renewables, Electric mobility, Water & Waste and the Circular Economy.

Energy Transition Acceleration Finance

• MAS, together with the Asian Development Bank and Global Energy Alliance for People and Planet, signed an MOU to set up an energy transition acceleration finance partnership to mobilise concessional capital from the philanthropic and public sectors, de-risk projects, and crowd-in private capital from around the globe to finance energy transition projects in Asia. 

• MAS Media Release, published on 3 December 2023, on Allied Climate Partners, International Finance Corporation, MAS and Temasek Establish a Green Investments Partnership in Asia
• MAS Media Release, published on 5 December 2023, on ADB, GEAPP and MAS to Establish Energy Transition Acceleration Finance Partnerships in Asia 

The MAS and Institute of Banking and Finance (IBF), supported by Workforce Singapore (WSG), launched the Sustainable Finance Jobs Transformation Map (SF JTM) on 17 April 2024. This lays out the impact of sustainability trends on jobs in Singapore’s financial services sector and the emerging skills that the workforce will require to serve sustainable financing demand in the region.

More than 50,000 professionals in the financial services sector will see new sustainable finance-related tasks added to their jobs to a moderate to high degree across career tracks, especially risk, compliance and legal, product solutioning and management, as well as sales, after sales, distribution and relationship management. 20 unique job roles were identified as high priority roles for upskilling, including relationship managers in corporate banking and portfolio managers. New job roles will emerge, in areas such as sustainability risk and sustainability strategy. The SF JTM study calls for Singapore’s financial services sector workforce in these jobs to undergo upskilling within the next three years to seize these opportunities. 

MAS has set aside S$35 million in the Financial Sector Development Fund to support upskilling and reskilling, and develop specialists in sustainable finance over the next three years. Key initiatives to upskill the financial services sector workforce include:

• Expanding the suite of sustainable finance courses for individuals, where (a) two undergraduate programmes focusing on sustainable finance will be developed and (b) more than 65 new executive courses and a new executive masters in sustainable finance will be launched in 2024 by institutes of higher learning, training providers and centres of excellence.
• Implementing an IBF Skills Badge to recognise industry professionals’ acquisition of sustainable finance skills.

• Speech by Mr Alvin Tan, Minister of State, Ministry of Trade and Industry and Ministry of Culture, Community and Youth, and Board Member of MAS, delivered on 17 April 2024, Launch of the Sustainable Finance Jobs Transformation Map
• MAS-IBF-WSG Joint Media Release, published on 17 April 2024, on MAS sets aside $35 million to Support Upskilling Singapore’s Financial Services Sector Workforce in Sustainable Finance  
• Sustainable Finance Jobs Transformation Map Study Report  

A vibrant and robust sustainable finance ecosystem needs to be built on a strong foundation of trusted, credible and transparent data. Technology is a key enabler to facilitate trusted and efficient environmental, social and governance (ESG) data flows and enhance climate-related disclosures and data. 

MAS launched Gprnt (pronounced “Greenprint”) in November 2023. Gprnt is an integrated digital platform that harnesses technology to simplify how the financial sector and real economy collect, access and act upon ESG data to support their sustainability initiatives. The platform is a culmination of MAS’ Project Greenprint and will serve both businesses and corporates as well as financial institutions. 

Gprnt is launching in phases across 2024. It will focus initially on automating basic climate reporting by SMEs, and progressively scale its automation capabilities to support the climate-related disclosure needs of larger corporates.

• Speech by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, delivered on 16 November 2023, at the Singapore FinTech Festival 2023 on “Shaping the Financial Ecosystem of the Future”
• MAS Media Release, published on 16 November 2023, on MAS launches Digital Platform for Seamless ESG Data Collection and Access 

Singapore Sustainable Finance Association

The Singapore Sustainable Finance Association (SSFA) was launched in January 2024. The SSFA is co-chaired by BlackRock and HSBC Singapore, and will include members and partners from financial institutions, exchanges, financial industry associations, and relevant corporates and service providers such as ESG rating agencies. 

As a start, SSFA has set up five workstreams to look at key focus areas for sustainable finance.

• Carbon Markets: Support the development of a vibrant and transparent carbon market.
• Transition Finance: Scale transition finance and mainstream financial institutions transition planning, including developing an ecosystem conducive for transition finance.
• Blended Finance: Foster collaboration and convene market players to explore scaling blended finance models.
• Natural Capital and Biodiversity: Support the financial sector in addressing nature-related risks and opportunities.
• Taxonomy: Explore practical applications and enhance interoperability of the Singapore-Asia taxonomy with other international taxonomies.

• Speech by Mr Chia Der Jiun, Managing Director, Monetary Authority of Singapore, delivered on 24 January 2024, Launch of the Singapore Sustainable Finance Association
• SSFA Website
• SSFA Media Release, published on 24 January 2024, on the launch of the SSFA  

Industry Engagement Conference and Roundtables

MAS convened discussion platforms designed to mobilise financing required for an effective and inclusive transition to net zero:

• Financing Asia’s Transition Conference (FAST) 2024: Themed “Crowding in Capital for Sustainable Growth”, FAST 2024 focused on concrete innovative public and private solutions to support the transition to a low-carbon economy. Panels highlighted the importance of private-public-philanthropic collaboration, opportunities, role of private sector in adaptation finance, and included a showcase of pilots by ACEN, ADB and Rockefeller Foundation to utilise transition credits to accelerate retirement of a coal plant in Philippines. These pilots are part of MAS’ initiative with partners to develop and scale transition credits as a complementary financing solution for coal transition in Asia.

• Finance for Net Zero (FiNZ) Connect: Launched in 2023, the FiNZ Connect series aimed to complement the FAST Conference and facilitate sectoral deep dive discussions and the development of financing solutions relevant to Asia. This can enable greater opportunities for collaboration across the ecosystem. Roundtables held in 2024 included topical issues on transition finance to catalyse Asia’s energy transition, the managed phase out of coal, application of blended finance to scale nature-based solutions, as well as ways to develop a strong and capable workforce in sustainable finance.

NGFS Blended Finance Initiative

MAS co-chaired an NGFS blended finance initiative, which published a Technical Document on Scaling Up Blended Finance for Climate Mitigation and Adaptation in Emerging Market and Developing Economies (EMDEs) on 4 December 2023. The Technical Document identifies recommendations aimed at addressing key barriers to scaling blended finance in EMDEs and showcases demonstrative projects from various EMDEs that have successfully crowded in private capital into climate financing projects.

• NGFS Press Release, published on 4 December 2023, on NGFS publishes a document on Scaling up Blended Finance in EMDEs  

Global Asia Insurance Partnership (GAIP)

GAIP GAIP is a centre of excellence for insurance and risk management focused on producing actionable research insights, developing policy recommendations, and co-creating innovative solutions for key risks that Asia faces., which is a tripartite partnership between the global insurance industry, regulators and academia, supported by the Monetary Authority of Singapore, published two papers focussed on addressing climate change: “Too Hot to Insure – Avoiding the Insurability Tipping Point” on 20 November 2023, and “Beyond Protection – Steering Towards a Resilient Net-Zero Future” on 11 April 2024. The first paper analysed how insurers’ current pricing and underwriting practices accounted for climate-related risks and affirmed the need for supervisory oversight to safeguard the resilience of the insurance sector against future climate change impact.  The second paper identified how the roles of the insurance industry as underwriters, advisors, investors and market influencers, could support Asia’s net zero transition. As a next step, GAIP will study cross-sectional initiatives and collaborations for insurers to play their various roles to help countries achieve resilience to climate change.

• GAIP publication, on 20 November 2023, “Too Hot to Insure – Avoiding the Insurability Tipping Point” 
• GAIP publication, on 11 April 2024, “Beyond Protection – Steering Towards a Resilient Net-Zero Future”  

Collaboration with UK and China

At the 9th UK-Singapore Financial Dialogue on 9 May 2024, the UK and Singapore agreed to strengthen collaboration in sustainable finance, among other issues discussed. The meeting discussed collaboration opportunities in priority areas such as developments in transition planning, disclosure standards, ESG ratings and data products, and sustainable infrastructure and investments. Both countries also renewed their commitment to engagement beyond the Dialogue through a series of roadmap engagements to explore further cooperation in areas including sustainable finance, ahead of the next Financial Dialogue due to be held in the UK in 2025. 

MAS and the People’s Bank of China have established the China-Singapore Green Finance Taskforce (GFTF) to deepen bilateral cooperation and facilitate greater public-private sector collaboration in green and transition finance. The inaugural GFTF meeting, held in Chongqing in April 2023, discussed joint initiatives in three priority areas: (i) taxonomies and definitions; (ii) products; and (iii) technology. All three workstreams are aimed at scaling green and transition financing flows between China, Singapore, and the region. The 2nd GFTF was held on 20 May 2024 and discussed the alignment of taxonomies, facilitation of green finance flows, and the development of a decarbonisation rating platform. 

• MAS Media Release, published on 8 May 2024, on UK and Singapore Strengthen Collaboration in Sustainable Finance and FinTech
• MAS Media Release, published on 21 May 2024, on MAS and People’s Bank of China Advance Collaboration in Green and Transition Finance