ASEAN greenlights coal phase out in updated sustainable finance taxonomy

Version two includes a completed framework

The ASEAN Taxonomy Board (ATB), representing ASEAN finance sectoral bodies, has released the second version of its sustainable finance taxonomy.

The ASEAN Taxonomy for Sustainable Finance Version 2 expands on the first version published in November 2021 with a complete framework comprising detailed methodologies for assessing economic activities.

It also includes technical screening criteria for the first sector in focus, which is the energy sector. The board said other sectors will be addressed in later versions.

The board said the focus on energy includes an emphasis on phasing out coal.

“In considering ASEAN’s specific circumstances, the taxonomy recognises efforts to the early retirement of coal-fired power plants,” it said.

“A global first for a regional taxonomy, the ATB has thoroughly considered how and where coal phase-outs can play a role in decarbonisation in support of the Paris Agreement goals and when approached correctly, provides a powerful tool for transition.”

The framework uses questions to classify activities as green, amber and red, with the green tier earmarked as activities aligned with the Paris Agreement. The environmental objectives include climate change mitigation and adaptation, biodiversity protection, resource resilience, and circular economy transition.

Version two also has a greater emphasis on social factors in the transition, including a ‘do no significant harm’ and ‘remedial measures to transition’ principles.