MAS, as Singapore’s integrated financial regulator, is responsible for well-functioning financial markets and fostering a sound financial sector through its prudential oversight of financial institutions (FIs) in Singapore.
MAS has progressively integrated environmental risk into its supervisory framework and processes at the individual firm and system-wide levels. MAS will continue its efforts to
- uplift environmental risk management practices of FIs through ongoing supervision and industry partnership,
- deepen climate risk assessment capabilities through climate scenario analysis, and
- enhance environmental and climate-related disclosure standards to promote market transparency.
MAS has set out supervisory expectations around effective governance, robust risk management, and meaningful disclosure of environmental-related risks through the issuance of the Guidelines on Environmental Risk Management to FIs (ENRM Guidelines) in December 2020.
In May 2022, to accelerate FIs' adoption of the ENRM Guidelines and uplift industry standards, MAS also published information papers on the environmental risk management practices of banks, insurers and asset managers. The papers provide an overview of the progress made by selected FIs in implementing the ENRM Guidelines, identify emerging and/or good environmental risk management practices by financial institutions, and highlight areas where further work is needed.
Consultation Papers on Proposed Guidelines on Transition Planning
MAS has issued a set of consultation papers on its Guidelines on Transition Planning for banks, insurers and asset managers (collectively financial institutions or FIs). The Guidelines set out MAS’ proposed supervisory expectations for FIs to have a sound transition planning process to enable effective climate change mitigation and adaptation measures by their customers and investee companies in the global transition to a net zero economy and the expected physical effects of climate change.
- , issued by the , in January 2021. The handbook offers guidance to banks, insurers, and asset managers on best practices in environmental risk management and supports the financial industry’s efforts to implement MAS’ Guidelines on Environmental Risk Management.
- , and , issued in April 2022. Developed by GFIT, the ERQ is the first industry-standard template that sets a consistent baseline for banks in Singapore to engage their corporate clients on environmental risk issues, gather data points, and identify opportunities to finance the transition to a low carbon economy.
Climate-related events and their associated risks are subject to significant uncertainty in terms of their timing, frequency, or severity. Given these uncertainties, stress testing and scenario analysis are useful tools for assessing the potential impact of climate risks on financial institutions and the broader economy.
As part of the 2018 Industry-Wide Stress Test exercise, MAS subjected insurers to a scenario featuring extreme flooding in Singapore, and they had to consider the impact of higher claims on their balance sheets arising from damage to insured properties.
MAS has incorporated a range of long-term climate scenarios as part of the 2022 Industry-Wide Stress Test exercise. The exercise raised awareness of the potential economic and financial implications of climate risks, and will facilitate learning for both MAS and financial institutions as we collectively develop capabilities in this area. Findings from the exercise will be published in MAS’ Financial Stability Review 2022.