sg-crest A Singapore Government Agency Website

A Vibrant Sustainable Finance Ecosystem

MAS is collaborating closely with financial institutions, businesses, FinTechs and international counterparts to broaden and deepen sustainable finance capabilities, to support Asia’s transition to a low-carbon future.

Risk Management

Overview

Greenwashing can occur at the firm level and product level, such as the overstatement or lack of clarity about a firm’s sustainability commitments, or lack of alignment between the product’s stated sustainability objective versus its actual investment allocations. With increasing inflows into sustainable products and investments, it is critical to guard against the risk of greenwashing to restore investors’ confidence.

MAS' efforts to mitigate greenwashing in the financial system are focused on these enablers: (i) taxonomies to serve as an established, science-based and common reference for financial institutions to determine if an economic activity is green or transition, by enabling activities to be evaluated against specific criteria; (ii) consistent disclosures to ensure that financial institutions and corporates report the activities conducted and the extent of greenness, and in certain jurisdictions, referencing the taxonomy; and (iii) leveraging technology to obtain real-time data to facilitate timely evaluation of the greenness of companies and activities, and verifying compliance with international standards.

Over the past year, MAS has built on these efforts to mitigate greenwashing, including ensuring that its grant schemes have sufficient safeguards, and improving market confidence of Environmental, Social and Governance ("ESG") ratings and data products.

Safeguards to Mitigate Greenwashing Risks through MAS Grant Schemes Applications

Expectations on Transition Instruments Eligible for MAS Grant Schemes

Transition bonds today form a very small segment – less than half a percent – of the global sustainable bond market, largely due to the lack of clarity and definition around transition activities.

As MAS promotes the growth of the transition debt market to serve market needs, through enhancements to our Sustainable Bond Grant Scheme and Sustainable Loan Grant Scheme, MAS has put in place credibility safeguards to mitigate the risk of “transition-washing” and the misuse of proceeds. To qualify for the grant, issuers/borrowers for transition bonds and loans must demonstrate alignment with the transition category under the Singapore-Asia Taxonomy or any other prescribed taxonomies with equivalent transition categories. The transition bonds and loans must also be aligned with internationally recognised transition bond and loans principles, standards or guidance and be accompanied by the disclosure of an entity-level transition plan.

Improve Market Confidence in the Use of ESG Ratings and Data Products

As sustainable investing becomes mainstream, there has been an increasing use of ESG ratings and data products for investing and capital allocation.

To improve market confidence in the use of ESG ratings and data products to aid decision making in capital allocation, MAS has issued a public consultation on a voluntary industry Code of Conduct (CoC) for ESG ratings and data product providers. This Code will set out best practices on governance, management of conflicts of interest and transparency of methodologies and data sources. A key thrust of the industry CoC is to require disclosures on how transition risks are factored into the products of ESG rating and data product providers to better support transition finance. This will also help to improve market confidence in the use of ESG ratings and data products.

 

Previous Strategy