MAS, or the Monetary Authority of Singapore, is taking significant steps to encourage financial institutions to prioritize decarbonization efforts. In order to achieve this, MAS plans to establish clear supervisory expectations for credible decarbonization efforts by financial institutions. This will help ensure that these institutions are actively working towards reducing their carbon footprint and supporting climate-positive outcomes.
Financial supervisors play a crucial role in incentivizing financial institutions and their customers to support longer-term climate-positive outcomes. MAS recognizes this and aims to provide the necessary incentives to encourage these institutions to prioritize sustainability. By doing so, MAS hopes to create a financial ecosystem that actively supports the transition to a greener and more sustainable future.
In 2023, MAS plans to issue a consultation paper on guidance for transition planning. This guidance will provide financial institutions with a framework to effectively plan and execute their transition towards more sustainable practices. By setting clear expectations and providing guidance, MAS aims to ensure that financial institutions have a roadmap for their decarbonization efforts.
In addition to setting supervisory expectations and providing guidance, MAS is also working with other government agencies to explore platforms for channeling blended finance into transition and green infrastructure projects. This collaboration is essential in mobilizing funds for sustainable projects and accelerating the transition to a low-carbon economy.
To further promote green and transition finance, MAS and the financial industry will establish the Singapore Sustainable Finance Association. This association will play a crucial role in promoting sustainable finance practices and facilitating collaboration among financial institutions in Singapore. By working together, MAS and the financial industry can drive sustainable finance initiatives and create a more sustainable financial ecosystem.
MAS also expects financial institutions to adopt robust governance and monitoring frameworks for a smooth transition to alternative reference rates. Critical benchmarks like SIBOR and SOR are particularly important in this transition, and institutions are expected to have clear timelines and milestones for completing the transition. Realistic targets for reducing the use of LIBOR should also be set to ensure a smooth transition.
Additionally, MAS encourages financial institutions to actively engage with their customers and counterparties to raise awareness about the transition and potential impacts on existing contracts. By fostering open communication and transparency, financial institutions can effectively manage the transition and minimize disruption.
MAS is taking proactive steps to drive decarbonization efforts and promote sustainable finance in Singapore. By setting supervisory expectations, providing guidance, and establishing collaborative platforms, MAS aims to create a financial ecosystem that actively supports the transition to a greener and more sustainable future. Financial institutions are expected to adopt robust governance frameworks and engage with stakeholders to ensure a smooth transition. Through these efforts, MAS and the financial industry are working towards building a more sustainable and resilient financial system in Singapore.
