MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy
The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals. The effective date for the amendments is May 14, 2022. In yet another development, the Green Finance Industry Taskforce (GFIT) of MAS is consulting, until June 23, 2022, on the second version of green and transition taxonomy.
The consultation builds on Green Finance Industry Taskforce’s earlier proposed taxonomy in January 2021 and seeks feedback on the detailed thresholds and criteria for economic activities in the energy, transport, and real estate sectors. Out of the eight focus sectors, the three sectors covered in this consultation collectively account for nearly 90% of the Association of Southeast Asian Nations (ASEAN) greenhouse gas emissions. The proposed thresholds and criteria can be used to classify an economic activity as green, amber, or red, using a traffic light system, to differentiate its contribution to climate change mitigation. A green classification represents activities that either contribute substantially to climate change mitigation by operating at net zero or are on a pathway to net zero by 2050. Additionally, an amber classification represents transition and includes activities that are either transitioning toward green within a certain timeframe, or facilitating significant emissions reductions in the short term while a red classification refers to harmful activities that are not compatible with a net zero trajectory.
The proposed taxonomy from the Taskforce accompanies a user guide for financial institutions and companies to apply the taxonomy. The user guide sets out details on the reporting of a company’s revenue, capital expenditures, and operating expenditures that are aligned with the taxonomy criteria. The Green Finance Industry Taskforce aims to release the criteria and thresholds for the remaining five sectors for public consultation in late 2022 and then subsequently finalize the full taxonomy in 2023. The remaining five sectors are Agriculture and Forestry/Land Use, Industrial, Information and Communications Technology, Waste/Circular Economy, and Carbon Capture and Sequestration.
Comment Due Date: June 23, 2022
Keywords: Asia Pacific, Singapore, Banking, ESG, Climate Change Risk, Sustainable Finance, Green Taxonomy, GFIT, MAS Notice 635, Unsecured Credit Facilities, Taxonomy, Disclosures, Credit Risk, Credit Limit, Lending, MAS
Featured Experts
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Hasan Cerhozi
Hasan leads Moody’s Analytics ESG methodology development. He is expert on carbon transition, nature related risks and is a guest lecturer at ESSEC Business school on sustainable finance.
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
Related Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards