Speeches
Published Date: 31 March 2022

Remarks by Ms Abigail Ng, Executive Director, Monetary Authority of Singapore, at the Stewardship Asia Roundtable 2022 on 31 March 2022

1. Good afternoon. It is my pleasure to join everyone virtually at the Stewardship Asia Roundtable 2022.

2. As Robert Swan, the lauded environmentalist and adventurer said: “The greatest threat to our planet, is the belief that someone else will save it.” Ladies and gentlemen, there is no “someone else”. There is here today, you and I, who have to work together on Creating a Collective Better Future.

3. This year’s Roundtable theme is a timely one, given how the past two years have brought to the fore challenges whose impact cut across geographies, groups of people, and even generations – from healthcare to climate crises, from widening inequalities to escalating conflicts. More than ever, there is a need for collective action for a better shared future. Every node within our economy – whether it’s investors, investees, or intermediaries –has a part to play in driving better decisions, better outcomes, and creating a collective better future.

4. As financial sector regulator, MAS is cognisant that we also have a role to play in driving better behaviours and outcomes. We do so through our regulations, supervisory engagements, and development incentives. But while such top-down efforts can serve to chart the path towards our desired end-goals, to truly catalyse change and make concrete headway, there must be a collective bottom-up effort, and a deep collective sense of responsibility to want to make a difference. This is the spirit that underlies the Singapore Stewardship Principles, or SSP for short. And that is why MAS is fully supportive of the industry’s efforts, led by Stewardship Asia Centre and the SSP Steering Committee, to develop and promote these Principles. We see the SSP as complementary to our regulatory frameworks. They encourage investors and intermediaries to pro-actively exercise their rights, to constructively engage their investee companies, and to responsibly exert market discipline to shape corporate behaviour, and aspire towards high standards of governance.

5. Since the SSP was introduced in 2016, there has been growing recognition of the significant economic and financial impacts of climate change and environmental, social and governance (ESG) risks. These include supply chains being disrupted by natural disasters, rising temperatures increasing the cost of cooling data centres, and the writing-off of assets, such as buildings in high flood-risk zones.

6. With this growing awareness of ESG risks, the concept of investor stewardship has likewise evolved. There is growing impetus and expectation for every investor to demonstrate how they can exercise their influence, to deliver long-term value not just for the company but for the broader economy, society, and environment. This shift is reflected in the fuller revised definition of investment stewardship in SSP 2.0, with a clear emphasis on creating, improving, and sustaining long-term value, as well as the explicit call for ESG to be incorporated into investment decisions.

7. MAS is firmly committed to the ESG agenda. We have been taking active steps to make Singapore’s financial sector a catalyst for change, through five broad strategies under our Green Finance Action Plan (GFAP)1. Today, I will highlight two initiatives that dovetail closely with the SSP – strengthening the financial sector resilience to environmental risks, and enhancing sustainability-related disclosures.

Strengthening the Financial Sector Resilience to Environmental Risks

8. First, as regulator, MAS is in a unique position to exercise our own form of stewardship, by promoting ESG practices within the financial sector. One of our priorities is ensuring that the financial sector actively considers climate-related and environmental risks. This is in line with the SSP’s push for signatories to integrate ESG considerations in their decision-making. MAS has issued three sets of Guidelines on Environmental Risk Management for Banks, Insurers and Asset Managers. These set out MAS’ supervisory expectations on the governance, risk management and disclosure of environmental risks.

9. In particular, we recognise that stewardship is one of the key levers for asset managers to manage environmental risk in their funds or mandates and achieve better long-term performance for their clients. Our ERM Guidelines set out clear expectations on asset managers to exercise sound stewardship through engagement, proxy voting and sector collaboration. These should then feed into the asset managers’ decision making through their research, portfolio construction and risk management practices. Asset managers are also expected to maintain proper documentation to support their engagement efforts and report on their stewardship initiatives for greater transparency and accountability. This works well with the SSP’s shift towards more outcome-focused reporting on stewardship activities. In this regard, we have seen encouraging progress. For instance, some asset managers have committed to engage with portfolio companies with highest emissions weighted by their ownership stake, or with companies that are collectively responsible for a certain percentage of owned emissions in the portfolio. We will be sharing more good practices with the release of our ERM Information Paper in the coming months.

10. MAS also complements our domestic efforts with international engagements. We were one of eight founding members of the Central Banks and Supervisors’ Network for Greening the Financial System (NGFS). This was launched in 2017 to enhance climate and environmental risk management in the financial industry globally. Its membership has now grown to 105 central banks and supervisors across five continents. In January this year, our MD, Ravi Menon was appointed Chair of the NGFS, affirming MAS’ commitment to the collective global effort of greening the financial system.

Enhancing Sustainability-related Disclosures

11. The second ESG strategy I want to touch on is on disclosures. Today, ESG disclosures lack detail and do not provide enough decision-useful information for investors. There is also a lack of consistency and comparability, with companies selectively reporting against different standards and frameworks. This state of affairs is not ideal and makes it difficult for investors to exercise stewardship based on ESG considerations. MAS and the financial sector have a role to play here, as the bridge between investors and investees. We are therefore highly involved in global conversations to enhance ESG disclosures.

12. MAS has been actively participating in international organisations like IOSCO, as part of its Sustainable Finance Task Force (STF). Last year, the STF released three reports recommending improvements to sustainability-related disclosures for issuers and asset managers, as well as to ESG data and ratings services.

13. As co-lead of the STF Technical Expert Group in 2021, MAS represented IOSCO in engaging the International Financial Reporting Standards (IFRS) Foundation to develop a global baseline sustainability reporting standard, and this led to the formation of the International Sustainability Standards Board (ISSB). The ISSB global reporting standard will promote more complete, consistent, and comparable sustainability-related disclosures, which will support asset managers in their ESG investments and stewardship. For 2022, MAS will, wearing our IOSCO hat, review the ISSB Exposure Drafts (that will be published today) on these disclosure requirements.

14. Closer to home, in December last year, SGX set out a roadmap for mandatory climate reporting for listed entities. MAS will similarly be setting out a roadmap for mandatory climate-related disclosures for financial institutions. Besides these requirements, MAS has also signed an MoU with CDP2 earlier this month, to promote sustainability disclosures and access to quality ESG data across the financial sector and real economy. All these are part of MAS’ multi-pronged approach to promote high quality sustainability-related disclosures, which can help asset owners and managers exercise investment stewardship more effectively.

Conclusion

15. To conclude, MAS is actively stewarding the financial sector towards greater ESG resilience and responsibility. But beyond the financial sector, these efforts also support the broader economy and investment eco-system – including everyone here today – in your own ESG stewardship journeys.

16. We are heartened to see all of you at today’s Roundtable, and we strongly encourage more market participants to become signatories of the SSP and to co-create sustainable business value in an environment of good governance. Let me once again thank SAC and the SSP Steering Committee for taking the lead in reviewing the SSP in step with global developments and regulatory guidance. I am confident today’s Roundtable will provide inspiration for taking concrete steps to effectively steward your businesses, your investees, to a better planet and a better future for generations to come.

Thank you.



[1] Strengthening the financial sector’s resilience to environmental risks. (2) Developing the green finance market and solutions. (3) Building knowledge and capabilities in sustainable finance. (4) Harnessing technology to enable trusted and efficient sustainable finance flows. (5) Enhancing climate-related disclosures and data.