MAS | Jan 28, 2022

Keynote Address by Mr Tan Keng Heng, Executive Director, Monetary Authority of Singapore

As we look into the future for the new year, I would like to speak about two global trends that are reshaping our asset management landscape of tomorrow. 

Advancing Green Finance, Managing Environmental Risk

First, as the transition to a greener and more sustainable future continues to gain in momentum, I am heartened by the industry’s positive efforts toward sustainable investment. Let me highlight some key developments in three areas:

1. Asset managers are embracing the vital role in facilitating green finance and sustainable investing.

We are seeing more and more managers stepping up to meet their clients’ needs for ‘green’ investment and channel capital toward sustainable businesses.  For instance, several managers have set up or announced to set up sustainability hubs in Singapore to accelerate their green finance agenda in Asia-Pacific.

See:  MAS: Global CBDC Challenge Report for Safe, Sustainable and Inclusive Finance

More have made public commitments toward building a greener economy, such as signing the UN Principles for Responsible Investing, with some setting measurable milestones to verify their progress toward meeting those commitments. Many more have also participated in collaborative platforms such as the Climate Action 100+ and the Institutional Investors Group on Climate Change, to spur investees toward reducing their environmental footprint in the real economy. 

2. Asset managers are building up their sustainable investing capabilities and environmental risk management practices.  

As the industry gears up for the implementation of MAS’ Guidelines on Environmental Risk Management (EnRM) in June this year, we have engaged and found our managers making tangible progress in their EnRM practices, which include for instance:

See:  Diving into Asia’s diverse markets

• Developing internal risk assessment methodology to quantitatively rate the environmental risks posed by investee companies;
• Incorporating environmental risk management-related key performance indicators in the remuneration structures of senior management; and
• Conducting scenario analysis to enhance portfolio resilience to environmental risks, and applying the results to prioritise the engagement of investee companies.

Many asset managers have also shared that they are making sustainability-related disclosures, ranging from standalone corporate sustainability reports to bilateral client reporting. This will benefit investors by enhancing market discipline and addressing climate-related risks and opportunities.