MAS proposes ways for financial institutions to work with clients, investee firms in move to net-zero economy

SINGAPORE – Financial institutions should join forces with their customers and investee companies to tackle the transition risks associated with climate change, noted the Monetary Authority of Singapore (MAS) on Wednesday.

These efforts should also include working together to implement measures to reduce carbon emissions and enhance climate resilience. 

The guidelines are part of a set of three MAS consultation papers to help banks, insurers and asset managers move towards a net-zero economy. 

It noted that the guidelines recognised the different business models and needs of institutions in banking, insurance and asset management. 

MAS proposed that financial institutions should take a “multi-year approach” to their transition processes as it can take a while for risks to manifest themselves.

It also proposed that financial institutions account for environmental risks beyond climate-related ones in their transition planning, including the potential trade-offs such as environmental degradation arising from pursuing sustainable solutions. 

Financial institutions are also expected to disclose “meaningful and relevant” information to help stakeholders understand how they are responding in the short, medium and long term to material climate-related risks, and the governance and processes for addressing these, it added.

MAS managing director Ravi Menon said: “Indiscriminate divestment from carbon-intensive activities will not get us to a net-zero world. A large part of the global economy depends on such activities for growth and jobs. 

“Rather, financial institutions must actively support their borrowers, insured parties, and investee companies to progressively decarbonise their activities through credible transition plans.”