Singapore has joined the Multi-Jurisdiction Common Ground Taxonomy (M-CGT) during the UN Cop 29 summit on 14 November, expanding an existing agreement between the EU and China on a set of financial environmental objectives and criteria.
The M-CGT allows for wider cross-border green financing and development of sustainable finance markets. It was developed by the People's Bank of China, the EU Directorate-general for financial stability, the Financial services and capital markets union, and the Monetary Authority of Singapore.
The M-CGT is a comparison of the sustainable finance taxonomies of China, the EU and Singapore, and it builds on the EU-China Common Ground Taxonomy, an initiative launched in 2021 aimed at enhancing the interoperability of the EU's and China's taxonomies. It is designed to accommodate more jurisdictions in future, which will further help facilitate cross-border climate finance flows, and in turn improve investment environments.
The M-CGT constitutes a set of environmental objectives and criteria that serves as a reference for entities such as financial institutions, corporates and investors to determine what can be considered green, said a joint statement by the parties. "While the M-CGT is not legally binding, green bonds and funds that align 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," stated the parties.
The M-CGT is important "for enhancing the interoperability of taxonomies across jurisdictions," said Ma Jun, chairman of the Green Finance Committee of China Society for Finance and Banking, adding that market usage of the CGT in the past two years, including for labelling Chinese green bonds sold to international investors, has shown it can help to cut cross-border transaction costs and boost green capital flows, particularly to developing economies.
The initial mapping exercise for the initiative indicated that around 60pc of common activities could be clearly defined under the most stringent criteria, mainly in the manufacturing, transportation, water and waste sectors, and 5pc of common activities in the electricity generation and construction sectors.
Climate finance has been a focus of this year's Cop 29 summit, especially on agreeing a new climate finance goal for developing countries. Discussions have so far only led to a complicated draft that still lacks a position on an amount from developed countries, which are pushing for an increase in private finance mobilisation as part of a multi-layered goal.
A UN-mandated high-level group noted yesterday that international private finance could meet around half of the funds that developing countries need — $1 trillion/yr by 2030 and $1.3 trillion/yr by 2035. But private investors have long been calling on governments to improve investment environments through clearer policies and provide easier access to public capital markets.
