The International Platform on Sustainable Finance presents Multi-Jurisdiction Common Ground Taxonomy to enhance interoperability of taxonomies across EU, China, and Singapore

18 December 2024

On 14 November 2024, the Monetary Authority of Singapore (“MAS”) issued a press release on the presentation of the Multi-Jurisdiction Common Ground Taxonomy (“M-CGT”) by The International Platform on Sustainable Finance (“IPSF”). The M-CGT provides a comparison of the sustainable finance taxonomies of China, the EU, and Singapore and aims to enhance interoperability of taxonomies across these jurisdictions.

Developed by the People’s Bank of China (“PBOC”), the European Union Directorate-General for Financial Stability, Financial Services and Capital Markets Union (FISMA), and MAS, the M-CGT builds on the EU-China Common Ground Taxonomy (“CGT”), a joint initiative under the IPSF by the European Commission and the PBOC in 2020 to enhance the interoperability of the EU and China’s taxonomies. With the publication of the M-CGT, the bilateral EU-China CGT will be expanded to include the Singapore-Asia Taxonomy, enhancing the interoperability of taxonomies across China, the EU, and Singapore.

M-CGT use cases

The M-CGT serves as a technical reference document for a wide range of market participants including financial institutions, corporates, investors, and external reviewers. It allows them to assess what could be considered green across the three jurisdictions, based on the activities, environmental objectives, and criteria covered in the M-CGT. While the M-CGT is not legally binding, green bonds and funds that align with the M-CGT criteria can be considered by cross-border investors whose markets reference the taxonomies which are mapped to M-CGT, subject to applicable laws and regulations of each jurisdiction.

The M-CGT will also serve as a reference for jurisdictions that are developing their domestic green taxonomies and has been designed to accommodate the comparison of more jurisdictions’ taxonomies in the future. This will increase the number of taxonomies that are interoperable and help facilitate cross-border green capital flows.

Updated methodology and key findings

The scope of M-CGT builds on the bilateral EU-China CGT, covering green activities across China, the EU, and Singapore taxonomies and their corresponding substantial contribution criteria that meet the climate change mitigation objective. The M-CGT analysed and mapped a total of 110 activities across eight focus sectors, while the bilateral EU-China CGT (2022 version) identified 72 activities across seven focus sectors.

The mapping exercise helped identify eligible activities that should be included in the M-CGT, and assigned scenarios based on the extent of commonalities found between these activities within the EU, China, and Singapore taxonomies. The M-CGT also facilitates the comparison of activities which do not have interoperable metrics, which allows for more activities to be included and analysed in the M-CGT.

For activities with the same or interoperable metrics (e.g. activities in the energy sector where life-cycle GHG emissions is a common metric), the level of stringency of the taxonomies’ criteria was assessed. The most stringent threshold was adopted for the M-CGT in these scenarios, such that an activity that meets the M-CGT criteria would be credibly accepted by investors in all the jurisdictions in scope. For activities with different metrics (e.g. activities which rely on local certification schemes, standards, or regulations), commonalities in the requirements of the taxonomies’ criteria were identified.

The press release reports the following findings from the mapping exercise:

  • Around 60% of common activities extracted from the three taxonomies could be clearly defined with the most stringent criteria, mainly across the manufacturing, transportation, water, and waste sectors.
  • The criteria for 5% of the common activities, mainly in the electricity generation and construction sectors, was aligned across the taxonomies.
  • The criteria for around 33% of common activities was not directly comparable across the taxonomies. In such cases, to be aligned with the M-CGT, an activity has to meet at least one of the taxonomies’ criteria. This was seen more commonly in sectors in which local regulations, standards or certifications are conventionally referenced, such as the construction and agriculture and forestry sectors.

The press release explains that these findings suggest that there is some degree of comparability of green activities across taxonomies of the three jurisdictions. This indicates that investors and financial institutions across China, the EU, and Singapore can consider green finance instruments that reference the M-CGT, subject to the applicable laws and regulations of each jurisdiction.

Reference materials 

The media release and the full details of the M-CGT are available from the MAS website www.mas.gov.sg and European Commission Finance finance.ec.europa.eu website respectively.