The Monetary Authority of Singapore (MAS) has published an information note on the application of the Singapore-Asia Taxonomy for Sustainable Finance (SAT) by financial institutions, corporates and the public sector.
The 20-page document outlines how banks in Singapore have referenced the SAT since it was launched in December 2023. It also highlights opportunities for the professional services community to adopt the SAT.
“We hope this encourages more users to consider referencing the SAT as a complementary tool to achieve their green and transition financing objectives,” reads the executive summary.
The SAT was the world’s first taxonomy to pioneer the concept of a “transition” category, setting out detailed thresholds and criteria for defining green and transition activities that contribute to climate change mitigation across eight focus sectors.
These sectors — which include energy, real estate and transportation — are responsible for 90% of Asean’s greenhouse gas emissions and over 40% of Asean’s economic value-add.
The SAT also covers managed coal phase-out, which aims to provide a credible standard to facilitate the early retirement of coal-fired power plants, aligned with a 1.5°C decarbonisation pathway for the global power sector.
See also: MAS launches Singapore-Asia Taxonomy, world's first to include 'transition' category
Minister in the Prime Minister’s Office Indranee Rajah says the SAT has “gained good traction” since it was launched.
In a March 18 LinkedIn post, Indranee encourages lawyers, consultants, external reviewers and auditors to reference the SAT in their work. “[They] can help enhance credibility and boost investor confidence by ensuring that sustainable financing frameworks and products meet internationally recognised standards and credible taxonomies, such as the SAT.”
Banks’ adoption
The new note includes eight examples of loans by Singapore’s three banks that are aligned with the SAT.
Some of them predate the SAT’s December 2023 launch; Oversea-Chinese Banking Corporation (OCBC) issued a green loan to Yinson GreenTech in June 2023 for the region’s first fully electric hydrofoil crew transfer vessel.
This loan was retroactively found to align with the green criteria under the SAT’s transportation sector, involving vessels with zero direct tailpipe CO2 emissions. “The Hydrogylder’s zero emission technology and energy-efficient design represent a key step towards advancing the maritime industry’s decarbonisation efforts,” reads the annexe.
OCBC has integrated the SAT into its Sustainable Finance Taxonomy, which is an internal document the bank uses to determine eligibility criteria for green, social or transition activities through use-of-proceeds loans.
Another example that involved all three Singaporean banks — along with Standard Chartered — is a $535 million green loan issued to Singtel in December 2023 for green data centres. The loan proceeds would be used to refinance existing borrowings and support the operations of DC West and DC Kim Chuan, both of which have attained the highest Green Mark Platinum certification.
This is aligned with the green criteria under the SAT’s real estate and construction sector.
Earlier this month, DBS updated its internal sustainable finance framework to align with the SAT. Its updated Transition Finance Framework is intended to capture opportunities aligned with internationally or nationally recognised and credible taxonomies — including the SAT — where possible.
See also: Singapore unveils Green Bond Framework, to issue first sovereign green bond in coming months
That said, DBS acknowledges that “guidance from taxonomies and industry best practices do not yet exist for various transition actions and activities”. For sectors like energy and real estate, the taxonomy has specific references to the SAT transition category and its technical screening criteria.
United Overseas Bank (UOB) is still in the process of aligning its framework and has yet to formally reference the SAT. The frameworks are undergoing external independent validation by second-party opinion consultant ERM, and UOB will publicly launch this later this month.
Following which, all new and refinanced sustainable financing from July 1 will adhere to SAT-referenced requirements.
The Edge Singapore has contacted the three banks for more information.
Public, private sector participation
In January, Singapore’s Ministry of Finance updated the Singapore Green Bond Framework (SGBF) to align green thresholds with those in the SAT, with DNV providing second-party opinion.
The SGBF governs the issuance of sovereign green bonds under the Significant Infrastructure Government Loan Act 2021 (SINGA) and serves as a reference for statutory boards developing their own green bond frameworks.
After Singapore’s statutory boards complete their update, all public sector green bonds issued under the updated SAT-aligned frameworks will be SAT-compliant, in addition to complying with international market standards, like the International Capital Market Association’s (ICMA) Green Bond Principles.
Separately, the Enterprise Financing Scheme-Green, launched by Enterprise Singapore in October 2021, was expanded in April 2024 to incorporate the SAT activities and extended for two years until March 31, 2026.
The scheme provides 70% risk-sharing to support lending by participating financial institutions to qualifying Singapore enterprises. Previously only applicable to developers of green solutions, the scheme now supports adopters of green or transition solutions and technologies.
Corporates, too, can reference or align with the SAT’s green and transition criteria. In October 2024, OUE Limited launched Singapore’s inaugural green bond in alignment with the SAT.
The five-year bond’s proceeds are allocated for four green buildings certified under the Green Mark 2021 scheme.
OUE Limited’s Green Finance Framework, supported by a second-party opinion from Sustainable Fitch, highlights the bond’s compliance with the SAT criteria.
OCBC, HSBC and CIMB were the joint lead managers, bookrunners and green finance structuring banks to the issuer for the offering of the notes.
This transaction is the first green bond to receive an independent external review confirming that the use-of-proceeds is fully aligned with the SAT.
Corporates can use the SAT to evaluate whether planned projects or capital expenditure qualify as green or transition activities as set out under the SAT, reads MAS’s note. Corporates can then engage banks to obtain financing through green, transition or sustainability-linked loans and bonds.
“Moving forward, as more corporates and banks align their sustainable financing frameworks with the SAT, we can expect a growing pipeline of deals that meet the SAT’s green and transition criteria, driving greater credibility and mitigating the risks of greenwashing across the region,” the note adds.
Infographic: MAS
Read more about green and transition finance:
- DBS updates transition finance framework, remains ‘committed’ to climate action amid backtracking among banks (March)
- Singapore’s three banks to remain in climate alliance despite US peers’ exit (January)
- Labelled bonds on the decline worldwide (December 2024)
- Global sustainable bond issuance down 20% y-o-y in 1H2024, but Moody’s confident of US$1 tril full-year target (July 2024)
- DBS thermal coal exposure down 33% from 2021, 'on track' to green five out of seven sectors: 2023 sustainability report (March 2024)
- Transition finance to gain prominence in 2024 as SLBs face greater scrutiny: Moody's (February 2024)
- Singapore's $2.8 bil green bond among growing sovereign offerings hawking ESG (August 2023)
- Singapore unveils Green Bond Framework, to issue first sovereign green bond in coming months (June 2022)
Read more about the early retirement of coal-fired power plants:
- Keppel, GenZero, Acen sign MOU to study, pioneer use of transition credits to retire coal plant in the Philippines (August 2024)
- HSBC-funded whitepaper proposes ‘repowering’ coal plants to support renewables (June 2024)
- One of MAS’s two coal plant retirement pilots provides first update since COP28 (April 2024)
- MAS launches coalition, two pilots to test 'transition credits' for early retirement of coal plants (December 2023)
- MAS launches Singapore-Asia Taxonomy, world's first to include 'transition' category (December 2023)
- 'Transition credits' could sweeten deal for early retirement of coal-fired power plants: MAS, McKinsey paper (September 2023)
- MAS panel discusses ways to phase out coal-fired power plants, adopt alternative fuels, attract private financing (September 2023)
