On 27 March 2024, the ASEAN Taxonomy Board (“ATB“) announced the release of the ASEAN Taxonomy for Sustainable Finance Version 3 (“ASEAN Taxonomy Version 3“). This release marks a significant step in ASEAN’s commitment to advancing sustainable finance across the ASEAN Member States (“AMS“) which, together, comprise the third largest economy in all of Asia and the fifth largest in the world.
To promote consistency among AMS taxonomies, the ATB developed a multi-tiered approach (implementing a traffic light classification system) to assess sustainable activities through the principles-based Foundation Framework, or the Plus Standard with a more detailed methodology incorporating the application of Technical Screening Criteria (“TSC“).
An activity takes place when resources such as capital, goods, labour, manufacturing techniques or intermediary products are combined to produce specific goods or services. For an activity to be classified under the ASEAN Taxonomy, it must contribute to at least one of the four Environmental Objectives (Climate Change Mitigation, Climate Change Adaptation, Protection of Healthy Ecosystems and Biodiversity, and Resource Resilience and the Transition to a Circular Economy) and fulfil all three Essential Criteria (Do No Significant Harm, Remedial Measures to Transition and Social Aspects).
In the ASEAN Taxonomy Version 3, the ‘Green’ tier is benchmarked to the 1.5°C Paris Agreement target and refers to widely recognised international taxonomies (e.g. EU Taxonomy). The ‘Amber’ tier serves as a transition category for companies to adjust their activities to move to the ‘Green’ tier, while a ‘Red’ classification indicates that an activity is not aligned with the ASEAN Taxonomy. The goal is for all activities to transition into the ‘Green’ tier.
Key updates to the ASEAN Taxonomy Version 3 include:
(a) TSC for two new focus sectors. Construction & Real Estate and Transportation & Storage:
- For Construction & Real Estate, activities include construction and renovation of buildings, demolition and site preparation, energy efficient equipment and energy performance and measurement.
- For Transportation & Storage, activities include infrastructure for roads, rail, ports and airports, as well as personal and freight transport by roads, rail, ports and airports.
(b) Alignment of Construction & Real Estate and Transportation & Storage focus sectors with International Standards. The Green tiers for Construction & Real Estate and Transportation & Storage have been aligned with relevant sectoral guidelines and regulations (e.g. International Green building certifications, International Maritime Organisation (IMO) 2023 GHG Emissions strategy). This alignment ensures compatibility with sector-specific guidelines and regulations, maintaining global interoperability while tailoring them to suit ASEAN’s context.
ATB will continue to conduct targeted consultations with key stakeholders and users of the ASEAN Taxonomy. Further, the ASEAN Taxonomy will be regularly reviewed and updated to reflect the evolving technological, scientific and economic developments.
ATB intends to release the TSC for the remaining focus and enabling sectors covered under the Plus Standard next year.
Click on the following links for more information:
Available on the ASEAN Capital Markets Forum (“ACMF“) website at www.theacmf.org:
- ACMF Media Release titled “ASEAN Taxonomy Board Releases ASEAN Taxonomy for Sustainable Finance – Version 3 for Transportation and Construction Sectors”
- ASEAN Taxonomy Version 3
Rajah & Tann publications:
