Knowledge Highlights 21 November 2024
Green Finance Industry Taskforce launches guide for climate-related disclosures and framework for green trade finance
On 19 May 2021, the Green Finance Industry Taskforce (“GFIT”), convened by the Monetary Authority of Singapore (“MAS”), launched several initiatives to accelerate green finance in Singapore through improving disclosures and fostering green solutions.
The initiatives developed by GFIT include (1) a detailed implementation guide for climate-related disclosures by financial institutions (“FIs”), (2) a framework to help banks assess eligible green trade finance transactions, and (3) a white paper on scaling green finance in the real estate, infrastructure, fund management and transition sectors. MAS announced that GFIT will also launch a series of workshops for FIs and corporates to build capacity in green finance, with support from its industry association partners.
Guide on implementing climate-related disclosures
The Financial Institutions Climate-related Disclosure Document (“FCDD”) highlights leading environmental disclosures practices to serve as a practical reference as FIs step up their efforts in the area of environmental disclosures. The FCDD adopts the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (“TCFD”).
The FCDD is divided into different sections for each of the banking, insurance and asset management sectors, taking into account the different approaches that the individual sectors could take. For each sector, recommendations are presented in line with the TCFD framework, which is divided into four pillars (namely governance, strategy, risk management, and metrics and targets) and 11 supporting recommended disclosures. For each key recommendation under the TCFD framework, three levels of reporting maturity are identified where possible to propose a pathway for reporting excellence.
The FCDD will help to enhance the quality of FIs’ climate disclosures, and facilitate more consistent and comparable disclosures across FIs.
Framework for green trade finance and working capital
The framework for green trade finance and working capital provides a principles-based approach for banks to assess eligible green trade finance transactions, and specific guidance on recommended industry certifications for trade finance activities to qualify as green. Guided by this framework, some banks have piloted green trade finance transactions for renewable energy, recycling, agriculture and farming activities, to support businesses in greening their supply chains.
White paper on scaling green finance
GFIT has also published a white paper on Fostering Green Finance Solutions, which seeks to address ways to develop and accelerate sustainable financing. Five key sectors that have the greatest near-term potential to catalyse change for greening the economy in Singapore and the region were identified: (1) green trade finance and working capital, (2) transition finance, (3) real estate, (4) infrastructure, and (5) fund management. Key solutions include a green securitisation platform to scale sustainable infrastructure investments in the region, and recommendations for the use of transition bonds and loans in the shipping, oil and gas and automotive sectors to support more sustainable practices.
MAS announced that in its next phase of work, GFIT will partner industry associations, financial institutions and businesses to develop and implement the recommended proposals.
Other developments
MAS also announced that GFIT will launch a series of workshops and e-learning modules from May 2021 to April 2022 for FIs and corporates. These programmes aim to strengthen the capabilities of banks, insurers and asset managers in environmental risk management, enhance their environment-related disclosures, deepen knowledge of green finance instruments, and enable FIs and corporates to customise green financing solutions for transition sectors.
Reference materials
The following materials are available on the MAS website www.mas.gov.sg and the Association of Banks in Singapore website www.abs.org.sg:
