The Monetary Authority of Singapore (MAS) will allocate US$1.8 billion ($2.4 billion) to five asset managers to help establish their Asia Pacific sustainability hubs in Singapore. And as Singapore’s central bank continues to nudge the financial services industry on the sustainability journey, MAS is hinting that additional money will be allocated down the road.
The five asset managers, who have yet been named, will launch new thematic funds focused on environmental, social and corporate governance (ESG) metrics. These funds will manage new equity and fixed income mandates focused on climate change and the environment.
The appointed managers will also invest in upskilling, building capacity plans on sustainability and furthering ESG research and green FinTech efforts, says Ravi Menon, managing director of MAS.
While MAS did not identify the appointed managers, Menon notes that the role requires “a lot of data and analytics to assess what is green’’, calling this a rare capability that not many asset managers possess. “We took a while evaluating the applicants for the mandates, to assess that they have strong capabilities to do good green investments,” he adds.
Menon signals more to come in the sustainability space following this sizeable pilot. “It’s a start. We want to gain experience doing this … If we all believe that green assets are going to outperform non-green assets, then there is a lot of return here that can be made.”
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“We are making an impact on greening the economies in the region. So, this is just the beginning. There’s more to come but we can’t rush into this.”
Menon was speaking at the launch of the MAS’s inaugural Sustainability Report on June 9, which brings together the central bank’s efforts at standardising climate change and sustainability reporting in Singapore.
“This inaugural Sustainability Report brings together the efforts that MAS is undertaking through its different roles to contribute towards a climate-resilient and environmentally sustainable world. We aim to lead by example, and we hope that financial institutions in Singapore and Asia will follow,” says Menon.
The US$1.8 billion is part of the US$2 billion Green Investments Programme (GIP) that was first announced in November 2019 at the Singapore FinTech Festival. MAS’s first investment under the GIP was a US$100 million placement in the Green Bond Investment Pool (GBIP) of the Bank for International Settlements (BIS).
There still remains some US$100 million, notes Leong Sing Chiong, deputy managing director for markets and development at MAS. “[The US$1.8 billion deployment] marks the completion of the current exercise. We could look for other opportunities in the future to place our funds as well.”
According to information on MAS’s website, Singapore held official foreign reserves totalling US$385.7 billion as of May 31. MAS has also placed some US$2.76 billion in currency and deposits with BIS, IMF and other national central banks. “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. This is why MAS is incorporating climate change and environmental sustainability across all its functions,” says Menon.
Weathering the storm
MAS has also partnered with GIC, Singapore’s sovereign wealth fund, and external consultants to conduct a climate scenario analysis on MAS’s portfolio over a 20-year horizon.
The analysis found that climate change can indeed threaten returns, particularly those of equities. Bonds and cash, on the other hand, are less affected by climate change, and MAS’s “well-diversified” portfolio, largely allocated in fixed income instruments, will help it weather the storm.
Temasek, the third active manager of Singapore’s assets, is similarly promoting sustainability. Most recently, Temasek announced it was joining forces with DBS Bank, Singapore Exchange (SGX), and Standard Chartered to develop Climate Impact X (CIX), a global carbon exchange and marketplace.
Organisations will be able to buy and sell carbon credits on CIX through different products and platforms that will be on offer.
In April, Temasek announced a series of late-stage venture capital and early growth private equity investment funds that will invest in firms working to reduce carbon emissions. Together with BlackRock, Temasek has committed a combined US$600 million in initial capital, with a target of raising US$1 billion.
A common standard
In addition, corporate climate change disclosures will soon be mandatory at home, with more details expected in 3Q2021 from MAS and SGX.
Together with the bourse, MAS will create roadmaps for mandatory climate-related financial disclosures by financial institutions and listed companies in Singapore. The regulatory bodies will consult the financial industry in the coming months.
SGX introduced sustainability reporting on a “comply or explain” basis in June 2016. Currently, SGX has not prescribed any particular reporting framework though it recommends “globally-recognised” frameworks and disclosure practices.
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Menon also spoke on arriving at such a global standard at the Green Swan Conference on June 4, co-hosted by the BIS, the Bank of France, the International Monetary Fund (IMF) and the Network for Greening the Financial System (NGFS).
“The IFRS [International Financial Reporting Standards] foundation is looking to set up an International Sustainability Standards Board to be a single global standard setter and this is on track for November this year,” says Menon.
“MAS is strongly supporting this initiative; we’re actually participating in the process … We are co-leading with the US Securities Exchange Commission to assess the technical recommendations by an IFRS working group on whether a prototype climate reporting standard can be a sound basis for future standards development once they’re established,” adds Menon.
Photo: Bloomberg
