• Enhanced Interoperability: Singapore, the EU, and China unveil the Multi-Jurisdiction Common Ground Taxonomy (M-CGT), boosting cross-border green financing.
• Broader Green Activity Coverage: M-CGT now includes 110 economic activities across eight sectors, up from 72 activities in the previous taxonomy.
• Facilitating Green Capital Flows: The M-CGT aims to reduce fragmentation and lower costs, benefiting investors and issuers in green finance.

Singapore has joined the European Union (EU) and China in presenting the Multi-Jurisdiction Common Ground Taxonomy (M-CGT), a significant step towards harmonizing sustainable finance taxonomies across the three regions. Developed by the People’s Bank of China (PBOC), the EU Directorate-General for Financial Stability (FISMA), and the Monetary Authority of Singapore (MAS), the M-CGT builds on the existing EU-China Common Ground Taxonomy (CGT) to include the Singapore-Asia Taxonomy (SAT).

The M-CGT serves as a technical reference for financial institutions, corporates, investors, and external reviewers, allowing them to assess what can be considered green across the three jurisdictions. While not legally binding, green bonds and funds aligned with the M-CGT criteria can be considered by cross-border investors whose markets reference the taxonomies mapped to M-CGT, subject to applicable laws and regulations.

Use-Cases of the M-CGT

The taxonomy is designed to facilitate cross-border green capital flows by increasing the interoperability of taxonomies. It can also serve as a reference for jurisdictions developing their domestic green taxonomies and is structured to accommodate future comparisons with other jurisdictions’ taxonomies.

Updated Methodology and Key Findings

The M-CGT analyzed and mapped 110 activities across eight focus sectors, compared to 72 activities across seven sectors in the previous CGT. The mapping exercise identified eligible activities and assessed the extent of commonalities among the EU, China, and Singapore taxonomies. Key findings include:

• 60% of common activities can be clearly defined with the most stringent criteria, mainly in manufacturing, transportation, water, and waste sectors.
• 5% of activities, mainly in electricity generation and construction, have aligned criteria across the taxonomies.
• 33% of activities are not directly comparable; in these cases, meeting at least one of the taxonomies’ criteria suffices for alignment with the M-CGT.

These findings suggest a significant degree of comparability of green activities across the three jurisdictions, indicating that investors and financial institutions can consider green finance instruments referencing the M-CGT.

Statements from the Three Jurisdictions

Dr. Ma Jun, Chairman of Green Finance Committee of China Society for Finance & Banking and Co-Chair of the IPSF Taxonomy Working Group, said:

“M-CGT is an important new milestone for enhancing interoperability of taxonomies across jurisdictions. The market usage of the CGT in the past two years, including for labelling Chinese green bonds sold to international investors, has demonstrated its ability to reduce cross-border transaction costs and boosting green capital flows especially to developing economies. The fact that CGT has already been used by several jurisdictions as a building block for taxonomy development suggests that M-CGT will have a greater potential to help assist other countries in developing their sustainable finance markets.”

Marcel Haag, Director for Horizontal Policies at the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union and Co-Chair of the IPSF Taxonomy Working Group, stated:

“The M-CGT is yet another key contribution of the International Platform on Sustainable Finance to the efforts of enhancing comparability and interoperability of taxonomies across the world, fully in line with G20 Sustainable Finance Working Group Roadmap and Principles. It will provide a useful reference for other jurisdictions and market operators regarding some of the features and commonalities across the activities of the Singapore, China, and EU taxonomies that are covered in this exercise.”

Gillian Tan, Assistant Managing Director (Development & International) and Chief Sustainability Officer of the Monetary Authority of Singapore, commented:

“The inclusion of the Singapore-Asia Taxonomy in the M-CGT is an important milestone in the International Platform on Sustainable Finance’s efforts to provide greater consistency and comparability of green activities’ criteria across different taxonomies. The M-CGT serves as a common baseline that market participants can refer to in defining green activities, enabling cross-border financing in the markets that the respective taxonomies serve.”

Expanding Use and Future Developments

The M-CGT is expected to facilitate easier access for Singaporean green bond issuers to EU and Chinese investors by aligning debt instruments with the expanded taxonomy. Dr. Ma Jun anticipates more jurisdictions will join the M-CGT, noting that Indonesia and Brazil have already expressed interest.

Gillian Tan highlighted the importance of reducing fragmentation in standards:

“Multiple standards mean fragmentation, and it’s just higher cost, so we absolutely need to do away with that.”

Dr. Ma Jun added that the M-CGT has the potential to reduce cross-border transaction costs and boost green capital flows, especially to developing economies.

Access the Full Details

The full details of the M-CGT can be found here.

Follow ESG News on LinkedIn