MAS to set expectations on credible transition planning by financial institutions

27 June 2023

On 8 June 2023, the Monetary Authority of Singapore (“MAS”) announced in a press release that it will set supervisory expectations to steer financial institutions’ transition planning processes to facilitate credible decarbonisation efforts by their clients.

There is a need for financial supervisors to incentivise financial institutions and their customers to bring forward their actions to support longer term climate-positive outcomes, as explained by Tharman Shanmugaratnam, Senior Minister and Coordinating Minister for Social Policies, and Chairman of MAS, in his speech at the Financing Asia’s Transition Conference on 8 June 2023.

The press release outlines the following upcoming developments:

  • Consultation on guidance for transition planning: 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 in 2023.
  • Platforms to channel blended finance into transition and green infrastructure projects: 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.
  • Establishing the Singapore Sustainable Finance Association (“SSFA”): Building on the strong achievements of the Green Finance Industry Taskforce, MAS together with the financial industry will establish the 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.

Reference materials

The following materials are available from the MAS website www.mas.gov.sg: