ATB releases first version of taxonomy for sustainable finance

KUCHING: Asean finance sectoral achieved a milestone towards meeting Paris Agreement commitments by introducing a common language across Asean for financing sustainable economic activities.

In conjunction with the 26th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26), the Asean Taxonomy Board (ATB) released the Asean Taxonomy for Sustainable Finance (Asean Taxonomy) – Version 1.

According to its press statement, Version 1 will provide a frame for discussions with official sector and private sector stakeholders to work together on the development of the Asean Taxonomy.

The Asean Taxonomy serves as a reference point to guide capital and funding towards activities that can help promote the systemic transformation needed for the region. The Asean Taxonomy is a collaborative initiative of the four Asean sectoral bodies that make up the ATB, namely the Asean Capital Markets Forum (ACMF), the Asean Insurance Regulators Meeting (AIRM), the Asean Senior Level Committee on Financial Integration (SLC), and the Asean Working Committee on Capital Market Development (WC-CMD).

This follows previous sustainable finance initiatives by the Asean sectoral bodies, such as the Asean Green, Social and Sustainability Bond Standards, and the Asean Sustainable Banking Principles.

The Asean Taxonomy represents the collective commitment of Asean Member States (AMS) in transitioning towards a sustainable region. It is designed to be an inclusive and credible classification system for sustainable activities and will be one of the key building blocks in attracting investments and financial flows into sustainable projects in the region.

The Asean Taxonomy recognises international aspirations and goals, and takes into consideration the region’s unique needs and as such, aims to be inclusive and beneficial to all AMS. To cater for AMS’ diversity, the ATB has decided upon a multi-tiered approach with two main elements, a principles-based

Foundation Framework which provides a qualitative assessment of activities, and a Plus Standard with metrics and thresholds to further qualify and benchmark eligible green activities and investments.

Version 1 elaborates on the key componentsoftheAseanTaxonomy including four environmental objectives and two essential criteria for the assessment of economic activities that act as the foundation to safeguard the environment and promote transition to low carbon and environmentally sustainable practices, and a list of focus sectors that the Plus Standard will cover as a first step.

It also focuses on a sectoragnostic decision tree to guide users of the Asean Taxonomy in classifying economic activities under the Foundation Framework, with suggestions for additional sector-specific guidance for AMS and entities who seek more specific guidance, and the ‘stacked approach’ that will be used to determine thresholds and technical screening criteria under the Plus Standard, which will be developed in the next phase.