The Monetary Authority of Singapore (MAS) has issued new guidelines outlining how banks, insurers and asset managers should manage climate transition and physical risks.
The Guidelines on Environmental Risk Management for Transition Planning set out MAS’ supervisory expectations for financial institutions and serve as an addendum to the Environmental Risk Management framework introduced in 2020.
MAS issued separate guidelines for banks, insurers and asset managers, reflecting differences in their business models and incorporating feedback from a public consultation and industry engagement.
Under the guidelines, financial institutions are expected to establish transition planning processes in a risk proportionate manner, taking into account the risk profile of their business models and local operating conditions.
Institutions should assess and manage both physical and transition risks arising from climate change by adapting their governance, business models and risk management practices.
MAS also expects financial institutions to engage customers and investee companies to better understand the climate related risks they face and how they are managed.
The regulator said this engagement should consider risk materiality when collecting data and help avoid indiscriminate withdrawal of credit, insurance coverage or investments that could affect financial stability.
MAS added that financial institutions should continue strengthening their capabilities to measure and manage climate related risks as data and methodologies evolve.
The guidelines will take effect in September 2027 after an 18 month transition period.
Ho Hern Shin, Deputy Managing Director for Financial Supervision at MAS, said,
“These guidelines support FIs in building their risk management capabilities in response to both physical and transition risks. The financial sector plays an important role in supporting customers as they navigate the risks from climate change.
By engaging their customers and investee companies in a risk proportionate manner, FIs can build better resilience to risks and support broader financial stability.”
Featured image: Edited by Fintech News Singapore, based on image by tahantanha10 via Freepik
