Risk Management
Overview
With increasing inflows into sustainable products and investments, it is critical to guard against the risk of greenwashing to restore investors’ confidence. 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.
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 treated as green or transition; and (ii) consistent disclosures to ensure that FIs and corporates report on the activities conducted and the extent of greenness.
Over the past year, MAS has built on these efforts to mitigate greenwashing, including ensuring that our grant schemes incorporate relevant safeguards, and publishing a Code of Conduct to improve market confidence of ESG ratings and data products. We also welcome the announcement of mandatory climate-related disclosures that are aligned with International Sustainability Standards Board (ISSB) Standards for listed issuers from FY2025 and large non-listed companies from FY2027 (please see “A Climate-Resilient Financial Sector section” for fuller details).
Industry Code of Conduct to enhance the transparency and comparability of ESG ratings and data products in Singapore
In December 2023, MAS published the Singapore Code of Conduct for ESG rating and data product providers (the "Code") and an accompanying checklist for providers to self-attest their compliance to the Code. The Code aims to establish baseline industry standards for transparency in methodologies and data sources, governance, and management of any conflicts of interest that may compromise the reliability and independence of the products. The Code also encourages providers to disclose how forward-looking elements – which can aid investors' assessments of investee responses to transition risks and opportunities – are considered in their ESG ratings and data products.
The Code of Conduct was co-drafted with the industry and builds upon IOSCO’s recommendations for good practices for such providers. To enable users to easily identify providers which have publicly adopted the Code, MAS worked with the International Capital Market Association (ICMA) to host a list of such providers on ICMA’s website.
The Code of Conduct was co-drafted with the industry and builds upon IOSCO’s recommendations for good practices for such providers. To enable users to easily identify providers which have publicly adopted the Code, MAS worked with the International Capital Market Association (ICMA) to host a list of such providers on ICMA’s website.