MAS awards green investment mandates

The Monetary Authority of Singapore (MAS) will channel $1.8bn into climate-related investment opportunities.

Five unnamed asset managers will receive the money, with mandates to invest in equity and fixed income securities focussed on climate change and the environment. They will need to establish their regional sustainability hubs in Singapore from where they will launch new ESG-focussed thematic funds.

“Finance is key to unlocking a sustainable future. It can support the transition to a less carbon-intensive economy by channelling capital to green technologies and infrastructure,” he said at the press conference,” said MAS managing director Ravi Menon, managing director of the MAS, at the launch of the central bank’s first sustainability report.

The funds will be distributed under the Green Investment Programme (GIP), which was set up in November 2019 and describes the MAS’s strategy to promote sustainable investments and practices.

“The GIP will help to enhance the climate resilience of the official foreign reserves, attract sustainability-focused asset managers to Singapore and catalyse funding towards environmentally sustainable projects in Asia and beyond,” said Menon.

The five external managers will need to consider the environmental management practices of companies that they invest in and the impact of its operations on the natural surroundings.

They will also have to develop capabilities in green finance through training programmes, as well as produce deeper research on ESG and green financial technology efforts.

Mitigating portfolio risks

Menon highlighted other developments as part of the MAS’s first sustainability report, such as its partnership with Singapore’s sovereign wealth fund GIC to conduct climate scenario analysis on its portfolio over the next 20 years.

The conclusion was that climate change can impact its portfolio negatively, although the effects are alleviated by its diversified portfolio of fixed income securities which are less vulnerable to climate change, according to the MAS.

It is also implementing a “climate risk mitigation overlay” for its equities portfolio, and might exclude companies whose revenues are at risk due to their inability to transition to low carbon energy.

The MAS also said it intends to report its progress in strengthening the climate resilience of its portfolio every year, for example through disclosing the weighted average carbon intensity of its equities portfolio compared with market benchmarks.

Meanwhile, the MAS and the Singapore Exchange (SGX) intends to draw up a framework for mandatory climate-related financial disclosures by financial institutions and listed entities in Singapore.

SGX has required listed companies to produce annual sustainability reporting on a comply-or-explain basis since 2016. The stock exchange will consult the industry about adopting the recommendations of the international Task Force on Climate-Related Financial Disclosures.

SGX would be the first exchange in Southeast Asia to fall in line, although Hong Kong and Japan have already done so.