Asset managers and other financial institutions should get to work on plans for transitioning to a net-zero economy, the Monetary Authority of Singapore said Oct. 18 in a consultation setting out the regulator's expectations.
The Guidelines on Transition Planning said asset managers should have "a sound transition planning process to enable effective climate change mitigation and adaptation measures by their customers and investee companies."
The guidelines stress engagement over divestment as "the key lever" for an orderly transition that results in customers and companies having credible transition and adaptation plans without losing the financing needed to decarbonize.
Financial institutions need to take a multi-year risk approach to assess the sustainability of their business models and portfolios and should consider environmental risks beyond those related to climate, including loss of nature capital and biodiversity, MAS said.
They "are expected to disclose meaningful and relevant information to help stakeholders understand how they are responding in the short-, medium- and long-term to material climate-related risks, and the governance and processes for addressing such risks," MAS said.
Ravi Menon, managing director of MAS, said in a statement that financial institutions "must actively support their borrowers, insured parties and investee companies to progressively decarbonize their activities through credible transition plans."
Comments on the proposals are due Dec. 18.