Five asset managers appointed to manage S$1.8 billion under new mandates focused on climate change and the environment.
The Monetary Authority of Singapore (MAS) has released its inaugural sustainability report, setting out its strategy to strengthen the resilience of Singapore’s financial sector to environmental risks and develop the city-state as a green finance hub.
“There is a renewed sense of urgency and commitment to the climate agenda,” MAS managing director Ravi Menon said on Wednesday, releasing the report. “Singapore is firmly committed to doing its part in the global effort to reduce greenhouse gas emissions.”
The report, said to be the first of its kind from a central bank in Asia, consolidates previously announced policies to green the financial sector and contribute to reaching net zero carbon emissions globally by 2050, in line with the Paris Agreement. The ‘Singapore Green Plan‘ launched earlier this year charts concrete sectoral plans and targets over the next ten years to cut emissions and build climate, resource and economic resilience.
“Finance is key to unlocking a sustainable future,” Menon said. “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.”
The report describes plans to build a climate-resilient reserves portfolio, initially focusing on equities, where companies most at risk from the transition towards lower carbon intensity will be excluded from the portfolio – such as firms that derive a substantial part of their revenues from thermal coal mining and have no credible transition plan.
As part of this effort, five unnamed asset managers have been appointed to manage new equity and fixed income mandates focused on climate change and the environment. Under this ‘Green Investment Programme’, S$1.8 billion of Singapore’s official foreign reserves will be allocated to the five appointed firms to invest in climate-related opportunities.
The asset managers will set up Asia-Pacific sustainability hubs in Singapore, launch new ESG thematic regional funds, and be expected to influence investee companies on climate-related matters through the exercise of their shareholder rights, including voting, engagement, and escalation.
MAS will also incorporate sustainable practices into its own practices and reduce its carbon footprint by cutting energy use in its buildings worldwide and reducing business travel. The regulator has already been reporting its own emissions for the past three financial years. These disclosures will be enhanced.
The report also sets out plans to further develop Singapore as a vibrant green finance ecosystem, including through promoting more growth in the green bond market. The ‘Sustainable Bond Grant Scheme’ launched in 2017 has already propelled the issuance of almost S$11 billion in green, social, and sustainability bonds in the city-state.
To help financial institutions build resilience against environmental risk, MAS has issued guidelines on environmental risk management and plans to conduct a review later this year on implementation progress. MAS will conduct stress tests on the financial industry under a range of climate change scenarios by the end of next year, drawing from climate scenarios developed by the NGFS and best practice approaches taken by other regulators.
MAS already expects all banks, insurers, and asset managers to make climate-related disclosures in line with the TCFD recommendations from June 2022. It plans to issue a consultation later this year focusing on how to transition these expectations into legally binding requirements, against a single, internationally aligned standard.