Sustainability Financing: Singapore Again Consults on ‘Green’ Taxonomy and Relevant Standards

June 01, 2022

Singapore’s Green Finance Industry Taskforce (GFIT) published a second consultation paper on 12 May 2022, proposing detailed thresholds and criteria for a revised Singapore taxonomy for Singapore-based financial institutions to identify “green” activities or activities transitioning towards green.

This paper comes after a January 2021 consultation paper, which broadly introduced a “traffic light” system for classifying activities as green (environmentally sustainable), amber (transition), or red (harmful) based on their contributions to a proposed set of environmental objectives.

Summary of Second Consultation Paper

The second consultation paper builds on the support of this taxonomy by expounding on the traffic light system for a narrower group of focus sectors.

First, it proposes a combination of principle-based criteria and thresholds for economic activities in, initially, three sectors: energy, transport, and real estate. These sectors have been prioritized as they are determined to have the highest environmental impact in Singapore.

Under the revised traffic light system, an economic activity may be classified as green, amber, or red depending on its level of contribution to climate change mitigation, one of five environmental objectives.


Represents activities that contribute substantially to climate change mitigation by operating at net zero or by being on a pathway to net zero by 2050. Any new activities (e.g., new power plants or new buildings) should fulfill this criterion.


Represents activities that are either transitioning towards green within a certain time frame or facilitating significant emissions reductions in the short term.


Refers to harmful activities that are not currently compatible with a net-zero trajectory. This means that they should either be phased out if emissions cannot be reduced (e.g., most fossil fuels) or reduce emissions to be in line with a green transition pathway.

Second, the consultation paper adds granularity to the application of the traffic light system, as it sub-categorizes activities in the energy, transport, and real estate sectors and proposes detailed metrices and thresholds for each of them. This minimises ambiguity and the potential for greenwashing around financial products and services, which should in turn stimulate demand for environmentally sustainable financing.

Third, the consultation paper provides detailed guidance on the reporting of a company’s revenue, capital expenditures, and operating expenditures that are aligned with the green taxonomy criteria.

Taxonomy in Practice

The key purpose of developing a green taxonomy for Singapore-based financial institutions (FIs) is to encourage the flow of capital to support the low-carbon transition needed to avoid catastrophic climate change, as well as the environmental objectives of Singapore and the Association of Southeast Asian Nations (ASEAN), which are serviced by Singapore-based FIs.

A key feature of the taxonomy is to contribute to, and enhance interoperability with, other regional and national taxonomies. Accordingly, this should help market participants to measure and compare environmental performance, as well as align assets and businesses across jurisdictions at a lower transaction cost.

Who Will Use the Taxonomy?

It is anticipated that Singapore-based FIs providing debt and/or equity capital would be the primary users of the taxonomy. Companies, regulators, and other financial market participants that need to define green activities, on the other hand, will be secondary users of the taxonomy.

How May the Taxonomy Be Used for Each Stakeholder?

For FIs, the taxonomy can serve as a powerful tool to redirect capital flows towards sustainable and low-carbon transition activities. It can assist them in their decision-making when allocating capital to different companies, investment funds, and other vehicles that are aligned with their environmental objectives.

For companies, the taxonomy can facilitate transparent and consistent disclosures of their own economic activities and environmental profile. By helping companies align their businesses to green economic activities, this could also assist them in gaining access to green financing opportunities.

Moving forward, it is proposed that FIs start reporting on their taxonomy alignment from 2023 onwards. Over the next one to three years, it is recommended that investors report their eligibility and the alignment of their investments with the taxonomy using the activity classification system. In the long term, as companies begin to report activity-level financial data and metrics on the alignment of their activities using technical screening criteria, investors should report both eligibility and alignment of their investments with the taxonomy.

Next Steps

GFIT aims to release the criteria and thresholds for the remaining five sectors for climate change mitigation in late 2022 and to finalise the full green taxonomy in 2023. In the meantime, all feedback on the second consultation paper must be submitted to GFIT by 23 June 2022.  Please contact us if you would like assistance on consolidating and submitting your feedback on the second consultation paper.

About GFIT

Convened by the Monetary Authority of Singapore, GFIT is an industry-led initiative comprising representatives from FIs, corporates, non-governmental organisations, and financial industry associations. It seeks to accelerate the development of green finance through four key initiatives: (1) developing a taxonomy, (2) enhancing the environmental risk management practices of FIs, (3) improving disclosures, and (4) fostering green finance solutions.