Towards a low-carbon economy

Regulatory body deploys five asset managers for climate-related investments

SINGAPORE: Some Us$1.8bil (S$2.38bil or Rm7.41bil) of Singapore’s official foreign reserves will be allocated to five asset managers for climate-related investments, Monetary Authority of Singapore (MAS) managing director Ravi Menon announced on Wednesday.

MAS will also be consulting the financial industry later this year on mandatory climate-related disclosures, with a focus on transitioning such expectations into legally binding requirements against global standards.

The moves are part of MAS’ plans to help Singapore make an orderly transition to a low-carbon economy, as outlined in its first sustainability report, also released on Wednesday.

The five asset managers will drive regional sustainable efforts by launching new thematic funds around environmental, social and governance (ESG) concerns and building capabilities in green finance through training programmes, Menon said.

They will also generate deeper green finance research customised for the region and explore green fintech solutions to facilitate trusted green flows out of Singapore, he added.

“Each of them is ramping up their plans to build up their Asia Pacific hubs in Singapore... We expect they will be able to do so over the next few months.”

Asset managers manage funds for individuals or companies. The asset managers were not named, in line with MAS practice.

Menon said: “Finance is key to unlocking a sustainable future. It can support the transition to a less carbon intensive economy and channel capital to green technologies and infrastructure.

“This is why MAS is incorporating climate change and environmental sustainability across all its functions. As the central bank and financial regulator, MAS is working with financial institutions to strengthen the Singapore financial sector’s resilience against environmental risks.”

As part of MAS’ green action plan, it also seeks to enhance climate-related financial disclosures by firms, the report noted.

MAS already expects all banks, insurers and asset managers to make climate-related financial disclosures from June 2022.

But it will consult the industry later this year on how to transition these expectations into legally binding requirements against a single internationally aligned standard.

The Singapore Exchange will also consult on proposed enhancements to sustainability reporting guidelines for listed firms, in line with global recommendations by the Task Force on Climate-related Financial Disclosures.

Menon said: “We need to urgently enhance the quality and consistency of climate-related disclosures.

“Reliable and comparable climate-related disclosures are critical for better pricing of climate-related risks, more effective risk management and market discipline, and effective allocation of capital towards financing green and transition activities.”

He added that the lack of consistent climate disclosure standards has resulted in selective reporting against different frameworks, impeding the growth of sustainable finance globally.

MAS has also issued guidelines on environmental risk management to all financial institutions. They cover environmental risks besides climate change, such as pollution, loss of biodiversity, and changes in land use.

MAS will conduct a review later this year of financial institutions’ progress in implementing the guidelines, Menon said.

In addition, MAS will work to grow an ecosystem of green finance and fintech capabilities to support and sustain Singapore’s development as a green finance hub, the report said.

Almost S$11bil (Rm34.19bil) of green, social and sustainability bonds have been issued here since 2017, it noted.

Over S$22.5bil (Rm69.93bil) of green and sustainability-linked loans have also been issued here from 2017 to last year.

MAS is supporting six green fintech projects through its financial sector technology and innovation grant scheme, for which it has earmarked S$50mil (Rm155.39mil).

The MAS chief said: “The climate crisis demands urgent, collective action to drastically reduce greenhouse gas emissions. The world is probably on the cusp of the greatest economic and societal transformation since the Industrial Revolution.

“The coming green revolution will involve all segments of the economy and society. Governments, businesses, and individuals will all need to do their part.”

“MAS is incorporating climate change and environmental sustainability across all its functions.” Ravi Menon