According to the Monetary Authority of Singapore media release on April 20, 2023, Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Monetary Authority of Singapore (MAS) Deputy Chairman, today announced the launch of MAS’ Finance for Net Zero (FiNZ) Action Plan at the opening of the Sustainable and Green Finance Institute of the National University of Singapore.
The FiNZ Action Plan sets out MAS’ strategies to mobilise financing to catalyse Asia’s net zero transition and decarbonisation activities in Singapore and the region. It expands the scope of MAS’ Green Finance Action Plan launched in 2019 to include transition finance. Transition finance refers to investment, lending, insurance, and related services to progressively decarbonise areas such as power generation, buildings, and transportation.
The FiNZ Action Plan aims to achieve the following four strategic outcomes:
Data, Definitions & Disclosures. MAS will continue to promote consistent, comparable, and reliable climate data and disclosures to guide decision making by financial market participants, and safeguard against greenwashing risks.
- MAS has been working with the industry to co-create a code of conduct, which will require ESG ratings and data product providers to disclose how transition risks are factored into their products. A public consultation to gather wider feedback will be conducted in the second half of the year.
- MAS will work with relevant counterparts and stakeholders to enhance interoperability of taxonomies across jurisdictions, to catalyse cross-border green and transition financing flows.
- MAS has been working with the Singapore Exchange and other government agencies to set out a roadmap for key financial institutions (FIs) and listed companies to make International Sustainability Standards Board (ISSB)-aligned disclosures on a risk-proportionate basis. MAS will partner with relevant bodies to build up companies’ capabilities in sustainability reporting
Climate Resilient Financial Sector. MAS will continue to engage FIs to foster sound environmental risk management practices and deepen climate scenario analysis and stress testing to identify climate-related financial risks. MAS will incorporate evolving international best practices in the supervision of FIs’ transition planning.
Credible Transition Plans. To support FIs’ adoption of science-based transition plans, MAS will engage international partners such as the International Energy Agency to support the development of credible regional sectoral decarbonisation pathways. FIs can reference these pathways when they set emissions reduction targets, and when they engage with their clients on initiatives to decarbonise their businesses.
Green & Transition Solutions & Markets. MAS will promote innovative and credible green and transition financing solutions and markets to support decarbonisation efforts and climate risk mitigation.
- MAS will expand the scope of its sustainable bond and loan grant schemes to include transition bonds and loans, with safeguards in place to mitigate the risk of “transition-washing” and ensure alignment with internationally recognised taxonomy and transition finance principles. To promote transparency in the sustainable debt market, MAS will incentivise the early adoption of entity-level sustainability disclosures by issuers or borrowers. MAS has set aside S$15 million over the next five years till end 2028 for the enhanced grant schemes. More details on these changes will be released shortly.
- MAS will extend the Insurance-Linked Securities (ILS) Grant Scheme till end 2025 to support the continued growth of catastrophe bonds and additional climate risk financing instruments such as sidecars, MAS will scale blended finance, in partnership with the private sector and philanthropic foundations, to mobilise financing for the decarbonisation of carbon-intensive sectors (e.g., managed phase-out of coal-fired power plants). In addition, we will support the development of carbon services and carbon credits markets in Singapore, to channel financing towards carbon abatement and removal projects in Asia.
To enable the above outcomes, MAS will continue to grow and scale Green FinTech solutions. MAS will also continue investing to develop the skills and capabilities of the Singapore workforce.
To qualify for the grants, the transition bonds and loans must be aligned with internationally recognised taxonomy and transition finance principles, and be accompanied by the disclosure of an entity-level transition plan.
Catastrophe bonds, sidecars and collateralised reinsurance are forms of insurance-linked securities. Sidecars are financial structures that enable third party investors to take on risk and returns from a specified book of re/insurance. Collateralised reinsurance are reinsurance contracts which are fully-collateralised by investors or third-party capital.
For more details, please refer to "Blended Finance for the Net-Zero Transition" - Opening Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at the Transition Finance towards Net Zero Conference on 4 October 2022
