MAS to Set Expectations on Credible Transition Planning by Financial Institutions

The Monetary Authority of Singapore (MAS) has announced that it will set supervisory expectations to steer financial institutions’ transition planning processes to facilitate credible decarbonisation efforts by their clients.

Speaking at the Financing Asia’s Transition (FAST) Conference, Mr Tharman Shanmugaratnam, Senior Minister and Coordinating Minister for Social Policies, and Chairman of MAS, underscored the need for financial supervisors to incentivise financial institutions and their customers to bring forward their actions to support longer term climate-positive outcomes.

The guidance on transition planning will cover financial institutions’ governance frameworks and client engagement processes to manage climate-related financial risks and enable transition in the real economy towards net-zero. Financial institutions should not indiscriminately de-risk from particular sectors, but instead carefully assess clients’ transition plans and provide the needed financing for transition where the plans are credible. In reviewing financial institutions’ implementation of transition plans, MAS will recognise that a short-term increase in their financed emissions may arise due to actions supporting longer term climate positive outcomes. MAS will issue a consultation paper later this year.

As announced by Mr Shanmugaratnam in his speech, MAS and other government agencies are collaborating with industry players to explore platforms to channel blended finance at scale into transition and green infrastructure projects in the region. MAS aims to bring together patient, concessionary capital from philanthropies, multilateral development banks, development finance institutions, and donor partners. This will in turn help to crowd in more conventional infrastructure financiers, including banks, and institutional investors. Details will be announced when the plans are more developed.

Building on the strong achievements of the Green Finance Industry Taskforce [1] , MAS together with the financial industry will establish the Singapore Sustainable Finance Association (SSFA) to build a vibrant ecosystem for green and transition finance. The SSFA will initially focus on initiatives to scale voluntary carbon markets, transition finance, and blended finance. The SSFA will include representatives from financial institutions, financial industry associations, relevant corporates and service providers such as ESG rating agencies. The Association of Banks in Singapore is leading the coordination and setting up of the SSFA.

Jointly organised by MAS, BlackRock and Temasek, the FAST Conference brought together key decision-makers across financial institutions and the real economy to catalyse green and transition finance. Speakers and panellists discussed opportunities in climate financing, particularly in emerging markets and developing economies; building net-zero portfolios; developing a trusted global carbon market; phasing out Asia’s coal-fired power plants and leveraging philanthropic capital.

MAS also launched a series of Finance for Net Zero (FiNZ) Connect roundtables and workshops to facilitate sectoral deep dive discussions and the development of financing solutions relevant to Asia. The series, held throughout the year, aims to complement the FAST Conference and enable greater opportunities for collaboration across the ecosystem. Roundtables held earlier in the year as part of this series included discussions on strategies to achieve Singapore’s 2050 net zero goal and the decarbonisation of the maritime sector.

MAS partnered with BlackRock, Convergence, Global-Asia Insurance Partnership (GAIP), and the Glasgow Financial Alliance for Net Zero (GFANZ) Asia Pacific Network to organise four FiNZ Connect roundtables after the FAST Conference. The roundtables discussed financing solutions for the maritime sector’s decarbonisation; the managed phase out of coal; and examined the role of insurers and philanthropies in scaling blended finance to mobilise capital for the transition.

The FAST Conference, together with the FiNZ Connect series, was co-hosted by MAS as part of Ecosperity Week 2023, with a focus on the nexus between the broader economy and the role of sustainable finance in facilitating the net zero transition. The events collectively underscore the urgent need for the public, private and philanthropic sectors to work synergistically to mobilise capital and drive concrete and practical financing solutions in Asia.

[1] The Green Finance Industry Taskforce was convened by the MAS in 2019 to help accelerate the development of green finance through four key initiatives including developing a taxonomy and enhancing environmental risk management practices of financial institutions. Please see link for the list of initiatives completed. The term of GFIT has ended in April 2023.