ASEAN Taxonomy for Sustainable Finance

The ASEAN Taxonomy for Sustainable Finance provides a comprehensive classification system for sustainable economic activities across the ten ASEAN member states, designed to facilitate sustainable finance flows while accommodating the diverse economic development levels and energy transition pathways of the region.

Developed by the ASEAN Taxonomy Board under the auspices of the ASEAN Finance Ministers and Central Bank Governors, Version 2 of the Taxonomy was released in March 2023. The framework is notable for its multi-tiered approach, which allows both a principles-based Foundation Framework and a more detailed Plus Standard with technical screening criteria.

Two-Tier Structure

The Foundation Framework provides a principles-based approach that all ASEAN member states can adopt immediately. It classifies activities across six categories using a traffic light system: Green (contributing substantially to environmental objectives), Amber (not significantly harming environmental objectives and on a transition pathway), and Red (significantly harming environmental objectives). This tier allows countries at different development stages to participate.

The Plus Standard provides detailed technical screening criteria for specific sectors, similar to the EU Taxonomy approach. It includes quantitative thresholds and metrics for determining whether activities qualify as green or transition. The Plus Standard is being developed sector by sector, with initial criteria covering energy, transportation, and buildings.

Environmental Objectives

The ASEAN Taxonomy covers four environmental objectives: climate change mitigation, climate change adaptation, protection of healthy ecosystems and biodiversity, and promotion of resource resilience and the transition to a circular economy. These objectives reflect the region's priorities, including the critical importance of biodiversity (ASEAN hosts three of the world's 17 megadiverse countries) and the need for climate adaptation in one of the world's most climate-vulnerable regions.

Transition Finance

A distinctive feature of the ASEAN Taxonomy is its explicit recognition of transition activities. Given that many ASEAN economies are heavily dependent on fossil fuels and face significant energy access challenges, the framework provides pathways for activities that are not yet green but are making credible progress toward sustainability. This includes provisions for natural gas as a transition fuel under certain conditions, reflecting the region's energy security needs.

Further Reading

• ASEAN Taxonomy — Official documents
• ASEAN Taxonomy Board — Governance and updates

Related Topics

• EU Taxonomy
• HK Green Taxonomy
• Green Taxonomies\n