Singapore–Asia Taxonomy Gains Ground in ASEAN, But Experts Urge More Proactive Strategy for Broader Impact

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Asia

---

Image Source: Seonghoon Kim, Weina Jhang, Johan Sulaeman

Since its launch in December 2023, the Singapore–Asia Taxonomy for Sustainable Finance (SAT) has made notable progress in setting rigorous, quantifiable benchmarks for green and transition finance in the ASEAN region. While hailed for its precision and global interoperability, experts argue that the SAT must adopt a more proactive approach to achieve its full potential as a regional and global standard.

The SAT has been praised for filling critical gaps in national frameworks across Southeast Asia. Countries like the Philippines and Malaysia, previously criticized for lacking quantitative criteria in their sustainable finance policies, may benefit from the SAT's high standards. With clear thresholds and a "traffic light" classification system, the SAT distinguishes between green (sustainable), amber (transitional), and ineligible (non-aligned) activities, offering investors a transparent framework for evaluating projects.

A cornerstone of the SAT’s success is its interoperability with the EU Taxonomy, the world’s most widely recognized standard for sustainable finance. By aligning key sectoral criteria including energy, transport, real estate, and ICT the SAT enables global investors to apply international principles to projects within the ASEAN context, bolstering regional confidence and attracting capital inflows.

However, the SAT faces a central challenge: balancing stringency with broad adoption. ASEAN nations have varied economic dependencies, particularly on fossil fuels, which may hinder widespread adoption of more rigid standards. Analysts note that SAT’s alignment with the April 2024 ASEAN Taxonomy for Sustainable Finance, which accounts for regional economic diversity, could be key to achieving both ambition and inclusivity.

Despite its promising framework, the SAT remains a voluntary tool, limiting its enforceability. Experts from the Sustainable and Green Finance Institute (SGFIN) at the National University of Singapore argue that integrating SAT standards into regulatory frameworks, disclosure requirements, and institutional reporting mechanisms would significantly enhance its impact.

“There needs to be a broader ecosystem of adoption,” said Prof. Johan Sulaeman, Director of SGFIN. “Policymakers must encourage institutional uptake while also promoting awareness beyond the financial sector to retail investors, academia, and the general public.”

Additionally, the current SAT version has largely focused on climate change mitigation. Future iterations must expand to cover climate adaptation, biodiversity protection, circular economy initiatives, and pollution prevention areas that remain underrepresented in regional taxonomies.

Singapore’s own energy transition also presents opportunities for evolution. While the SAT currently supports improvements in the carbon efficiency of natural gas and the expansion of renewables, further alignment with the EU’s classification of natural gas as a transitional activity could strengthen global coherence and bolster Singapore’s leadership role in sustainability.

Experts recommend periodic assessments to evaluate how deeply the SAT is being embedded into financial institutions’ decision-making processes, and whether national taxonomies across ASEAN are aligning with or referencing the SAT as a benchmark.

With its robust framework and regional leadership, the SAT stands poised to accelerate ASEAN’s sustainable finance transformation. However, its success will ultimately depend on broader adoption, strategic updates, and deeper integration into national policy agendas.