Sustainability Report 2021/2022 outlined MAS’ strategy and approaches to address climate-related financial risks associated with the investment of the Official Foreign Reserves ("OFR") portfolio. Over the course of the year, MAS implemented various aspects of our strategy to identify, assess and manage climate risks and opportunities. This report should be read in conjunction with the Sustainability Report 2021/2022 and highlights the key developments since then.

MAS' journey to study and address the threat of climate change on MAS’ OFR portfolio started in 2020 with the first scenario analysis to understand the potential long-term impact of a wide range of plausible climate scenarios on portfolio returns. In 2022, the results of the first scenario analysis were updated with a new climate scenario and enhancements to the climate risk models.

Drawing from the findings of the 2020 scenario analysis, a set of targeted portfolio actions was formulated in 2021, mainly focused on the equities portfolio. The broad range of portfolio actions includes raising expectations on the stewardship and engagement efforts of MAS' external fund managers, investing in transition opportunities and climate solutions, tilting portfolio exposures towards companies that are more aligned with the low-carbon transition over time, and as a last resort, divesting from select companies altogether. Collectively, these actions seek to enhance the climate resilience of the portfolio. Over the course of 2022 and 2023, MAS has started to implement these actions and will continue to calibrate them based on evidence of real-world transition progress, and implication on asset returns. Looking ahead, MAS is exploring suitable actions for our corporate bonds portfolio.

To gauge the level of transition risks and monitor the effectiveness of our actions, MAS started reporting the Weighted Average Carbon Intensity ("WACI") of the equities portfolios in 2021, which was then extended to the corporate bonds portfolio in 2022. MAS continues to explore relevant emissions-based and also forward-looking climate metrics for portfolio analysis and will consider including these metrics in future reports. MAS estimates that the portfolio actions that we implement over time will contribute to reducing the WACI of our equities portfolio by up to 50% by FY2030 compared to the base year of FY2018.