Strategy
Overview
Strengthening Financial Sector Resilience to Environmental Risks
The financial sector is exposed to environmental risks through its financing, insurance, and investment activities. The financial impact on banks, insurers and asset managers (collectively financial institutions) can arise through physical and transition risk channels. As Singapore’s integrated financial regulator, MAS is committed to play a leading role to bolster the financial sector’s resilience to environmental risks.
MAS has made good progress in integrating environmental risk into its supervisory framework and processes at both the individual firm and system-wide levels. MAS will continue its efforts to (i) uplift environmental risk management practices of financial institutions through ongoing supervision and industry engagement, (ii) deepen climate risk assessment capabilities through climate scenario analysis, and (iii) enhance climate-related disclosure standards to promote market transparency.
- MAS Information papers, published on 31 May 2022, on Environmental Risk Management
- MAS Guidelines, published on 8 December 2020, on Environmental Risk Management for Banks
- MAS Guidelines, published on 8 December 2020, on Environmental Risk Management for Asset Managers
- MAS Guidelines, published on 8 December 2020, on Environmental Risk Management for Insurers
Uplift Strong Risk Management and Transition Planning Practices of Financial Institutions
The Information Papers on Environmental Risk Management published in May 2022 provide an overview of the progress made by selected financial institutions in implementing the Guidelines on Environmental Risk Management (the Guidelines). They highlight emerging and good practices by financial institutions, identify areas where further work is needed and serve as a reference for financial institutions in strengthening their resilience to environmental risk. The Information Papers supplement the Guidelines on Environmental Risk Management which were issued in December 2020 and had taken effect in June 2022.
MAS has set clear supervisory expectations on environmental risk management to help set the pace for financial institutions to uplift their practices to assess, mitigate and monitor their exposures to environmental risk.
Later this year, MAS will consult on supervisory guidance to financial institutions on having a sound transition planning process that supports credible decarbonisation efforts of their clients. The guidance on transition planning will cover financial institutions’ governance frameworks and client engagement processes to manage climate-related financial risks and support transition in the real economy. This includes MAS’ expectations for financial institutions to partner clients with credible transition plans to transition rather than indiscriminately withdrawing credit from sectors of higher environmental risks. In reviewing financial institutions’ implementation of transition plans, MAS will recognise that a short-term increase in their financed emissions may arise due to actions supporting longer term climate positive outcomes.
Enhance Sustainability-related Disclosures
MAS welcomes the publication of the International Sustainability Standards Board's ("ISSB") Sustainability Disclosure Standards, that serve as a comprehensive global disclosure standard for corporate sustainability reporting.
MAS has been actively involved in the work of the International Organisation of Securities Commissions ("IOSCO") Sustainable Finance Task Force ("STF") in assessing the endorsement of the ISSB standards by IOSCO, which would in turn support adoption by IOSCO member jurisdictions.
Domestically, MAS is working with the Singapore Exchange Regulation ("SGX RegCo") towards aligning mandatory climate-related disclosure ("CRD") requirements for SGX-listed companies to the ISSB standards.
MAS will also review and consult on sector-specific guidance set out by international standard setting bodies such as the Basel Committee. Aligning CRD requirements to international standards will enhance market discipline and investor protection by providing capital providers with the necessary information to assess companies' prospects and management of climate-related risks.
Disclosure and Reporting Guidelines for Retail ESG Funds
In July 2022, MAS issued a set of disclosure and reporting guidelines for retail environmental, social and governance ("ESG") funds to mitigate greenwashing risks. From 1 January 2023, retail ESG funds must disclose in offering documents their ESG investment objectives and approaches, as well as relevant ESG criteria and metrics. Retail ESG funds will also have to periodically disclose their ESG-related investments and how their ESG objectives have been met. The new requirements will facilitate better-informed decision-making by investors through greater comparability across retail ESG funds.Collaborate Actively with Other Central Banks and Supervisors, Including in Transition Planning
International collaboration remains critical to facilitate the sharing of best practices as they emerge and promote globally compatible frameworks.
MAS actively contributes to global efforts on sustainable finance through our participation in, and leadership of, international committees and multilateral and regional platforms including the Network for Greening the Financial System ("NGFS"), Basel Committee Taskforce on Climate Related Financial Risks ("BCBS TFCR"), International Association of Insurance Supervisors ("IAIS") and Sustainable Insurance Forum ("SIF"). We work closely with our global counterparts to build alignment and advance global standards, encourage consistency in supervisory and regulatory approaches and minimise market fragmentation.
Our contribution to the work of international committees signifies MAS’ active involvement in shaping global best practices, regulatory and supervisory approaches to sustainability issues.
Network for Greening the Financial System ("NGFS")
MAS has been playing an active role in the NGFS' work on supervision, including the recent publication in May 2023 of a stock take on transition plans and their relevance to micro-prudential supervisors. The NGFS Workstream on Supervision contributes to the integration of climate-related risks into financial monitoring and micro-supervision, and of environmental risks more broadly. This includes examining the relevance and extent to which financial institutions' transition plans relate to supervisors' roles and mandates and could be considered within their supervisory toolkit.
Basel Committee Taskforce on Climate Related Financial Risks ("BCBS TFCR")
MAS is active in the BCBS TFCR, which is taking a holistic approach to addressing climate-related financial risks to the global banking system. This includes the assessment and consideration of disclosures, supervisory and regulatory measures. Last year, MAS co-led the supervision workstream resulting in the publication of the Principles for the Effective Management and Supervision of Climate-related Financial Risks in June 2022. For 2023-2024, MAS is co-leading the new workstream on transition planning to consider the role of transition planning in risk management and potential risks to banks, as well as the role of prudential supervisors vis-a-vis transition planning.
International Association of Insurance Supervisors ("IAIS")
The IAIS is the global standard-setting body responsible for developing and assisting in the implementation of principles, standards and other supporting material for the supervision of the insurance sector. MAS chairs the IAIS Climate Risk Steering Group ("CRSG"), which oversees the IAIS’ work on climate risk.
The first IAIS Climate Risk consultation, published in March 2023, provided an update on IAIS’ overall work programme to promote a globally consistent supervisory response to climate change in the insurance sector and proposed changes to the Insurance Core Principles ("ICP") Introduction, to position climate risk within the global framework for insurance supervision. The consultation also sought stakeholder feedback on the overall climate-related work as it relates to supervisory guidance.
In addition, MAS supported the inclusion of climate data elements for the IAIS Global Monitoring Exercise in 2022. These elements will become a regular feature of the IAIS’ annual assessment of insurance sector risks and provide a global baseline of climate risk data for the insurance sector.
Sustainable Insurance Forum ("SIF")
MAS chairs the UN-convened SIF, a global network of insurance supervisors and regulators working together to strengthen responses to sustainability issues facing the insurance sector. Apart from being a platform for international collaborative action on sustainability issues, the SIF’s work includes research on emerging sustainability risks and knowledge-sharing on supervisory practices. The SIF will continue to build on its previous work including net zero transition, access and affordability and nature-related risk.
International Organisation of Securities Commissions ("IOSCO")
MAS actively contributes to the Technical Review Coordination Group ("TRC") within the IOSCO Sustainable Finance Task Force ("STF"), which assessed and provided feedback on the draft standards issued for public consultation by the ISSB. MAS led the review of the ISSB’s climate disclosure standard, whose assessment will inform IOSCO’s potential endorsement of the finalised standards. An endorsement by IOSCO would facilitate IOSCO members’ use of the ISSB standards in their respective jurisdictions and enhance the consistency and comparability of sustainability-related financial disclosures.
MAS participates in other workstreams in the IOSCO STF, such as the Promoting Good Practices workstream and Assurance workstream. The Assurance workstream released a Report on International Work to Develop a Global Assurance Framework for Sustainability-related Corporate Reporting in March 2023. The report sets out IOSCO’s recommendations for a timely, profession-agnostic global framework for sustainability assurance, in support of ongoing work by international standard setters to develop sustainability assurance standards and ethics (including independence) guidance. High-quality sustainability assurance, carried out in accordance with an internationally recognised assurance standard, is key to ensuring the reliability of sustainability-related financial disclosures.
ASEAN Capital Markets Forum ("ACMF")
MAS leads efforts within the ACMF, a regional grouping of securities regulators, to promote corporate sustainability disclosures in the ASEAN region. As part of its efforts to drive sustainable development through the capital markets, the ACMF has developed a Roadmap for ASEAN Sustainable Capital Markets, which includes promoting corporate sustainability disclosures as a priority recommendation. The ACMF is collaborating with the ISSB to build capacity on the ISSB standards amongst the ASEAN regulatory, corporate and investor community.
The ACMF and the ISSB held the inaugural ACMF-ISSB Joint Conference and Technical Training on the IFRS Sustainability Disclosure Standards (“the Conference”) on 27-28 June 2023 in Singapore. The Conference served as the regional launch event of the finalised ISSB standards and formed a key plank in the capacity building programme under the ACMF-ISSB collaboration. Such capacity building is important for accelerating the adoption of the ISSB standards in the ASEAN region.