MAS to introduce ESG-specific requirements, release EnRM Information Paper, mandate climate-related financial disclosures for asset managers

25 February 2022

On 28 January 2022, Tan Keng Heng, Executive Director of the Monetary Authority of Singapore (“MAS”), delivered the keynote address at a forum organised by the Investment Management Association of Singapore.

In his speech, Mr Tan outlined some steps that MAS will be taking in the area of environment social governance (“ESG”).

ESG-specific requirements on fund naming, prospectus disclosures and periodic reporting disclosures

In his speech, Mr Tan cautioned that greenwashing poses a real and present danger to the asset management industry. On its part, MAS is fully committed to working with the industry to combat greenwashing, at both the fund and firm level:

  • Fund level: At the fund level, MAS intends to introduce ESG-specific requirements on fund naming, prospectus disclosures and periodic reporting disclosures. This will set out MAS’ supervisory expectations for retail ESG funds and help mitigate the risk of greenwashing in fund offer documents.
  • Firm level: At the firm level, MAS expects asset managers to ensure that their sustainability commitments reflect actual capabilities and practices on the ground. Managers of ESG funds in particular should consider implementing mechanisms to monitor compliance with stated ESG investment objectives, including exposure limits for the funds sold.

EnRM Information Paper

MAS will be releasing its Environmental Risk Management (“EnRM”) Information Paper in the coming months to help asset managers deepen their EnRM capabilities and adopt good practices, such as:

  • Having clear quantitative targets to shape and steer the manager’s strategy and business plan; and
  • Having a more consistent application of investee ESG risk assessments across the entire investment portfolio, and greater client engagement in the portfolio risk management process.

Mandating climate-related financial disclosures

To promote greater accountability and meet investor needs, MAS also intends to mandate asset managers to make climate-related financial disclosures. MAS will balance the benefits of such disclosures and the associated compliance costs by considering applying the mandatory disclosure requirements to the larger discretionary asset managers. MAS will also help managers to meet globally accepted disclosure standards by aligning its requirements with those that are being developed by, for example, the International Sustainability Standards Board. MAS will be conducting a public consultation and seeking feedback on these requirements.

Reference materials

The speech is available on the MAS website www.mas.gov.sg.