QUESTION NO 3410
NOTICE PAPER 1371 OF 2022
FOR WRITTEN ANSWER
Date: For Parliament Sitting on 03 October 2022
Name and Constituency of Member of Parliament
Mr Don Wee, MP, Chua Chu Kang GRC
Question:
To ask the Prime Minister given that Singapore has committed to achieve net-zero emissions by around 2050, how does MAS require all its regulated financial institutions to limit their financed emissions of the hard-to-abate sectors to align with the net-zero emissions policy.
Answer by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:
1. Hard-to-abate sectors refer to sectors where the technology to significantly reduce carbon emissions is either not available or remains expensive. These include the heavy industry, aviation and maritime transport sectors.It is still necessary to finance these hard-to-abate sectors because they are important parts of the economy, and alternative technologies to reduce emissions significantly have yet to be commercially viable or to achieve scale. The solution thus lies in helping firms in these sectors progressively reduce their carbon emissions and transit to cleaner energy over time.
2. Financial institutions should thus provide firms in these hard-to-abate sectors transition financing to decarbonize, so long as these firms have credible transition plans that are aligned with the Paris Agreement goals.
3. MAS has taken several steps to promote responsible and credible transition financing by banks in Singapore.
- We have given guidance to banks that indiscriminate credit withdrawal from hard-to-abate sectors deemed to be of higher climate-related risk would adversely impact companies with credible transition plans.
- Instead, MAS expects banks to guide and support their clients’ transition plans with appropriate financing. We are working with the Association of Banks in Singapore to develop a template on the kinds of information banks could collect from their clients in order to guide their financing decisions.
- Second, MAS has issued guidelines on environmental risk management to all financial institutions, including banks, insurers, and asset managers.MAS expects all financial institutions to assess and mitigate their exposures to environmental risks, including those stemming from the transition to net-zero.We have also begun to engage the banks on their transition plans to reduce their financing of emissions over time.
- Third, MAS has published a set of pieces highlighting emerging and good practices by financial institutions, including the approach towards sectors identified as posing higher environmental risks. The three local banks have established sector-specific policies to guide their risk assessment and lending decisions for clients in sectors with higher environmental risk.
4. Beyond supervisory expectations, a number of financial institutions in Singapore have voluntarily pledged net zero goals as members of the Glasgow Financial Alliance for Net Zero (GFANZ), and have set or are working towards setting interim targets to achieve these goals. More recently, with MAS’ support, the GFANZ Asia-Pacific Network was set up in Singapore to spearhead Asia’s efforts to transition towards net zero in a credible and inclusive manner.
5. MAS has been playing an active role as one of the leading regulators internationally who are seeking to promote finance as a critical enabler for global decarbonisation efforts. We will continue to engage financial institutions in building resilience to environmental risks and supporting an orderly transition towards a sustainable economy in Singapore and in the broader region.
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