MAS issues guidelines on environmental risk management for ...

The Guidelines aim to enhance the banking and insurance sectors' resilience to and management of environmental risk by setting out sound risk ... Skiptonavigation Skiptomaincontent(accesskeys) Skiptofooter(accesskeyx) 16December2020 On8December2020,theMonetaryAuthorityofSingapore(“MAS”)issuedthreeGuidelinesonEnvironmentalRiskManagementforfinancialinstitutions(“FIs”)(collectively,“Guidelines”): GuidelinesonEnvironmentalRiskManagement(Banks)(“GuidelinesforBanks”)  GuidelinesonEnvironmentalRiskManagement(Insurers)(“GuidelinesforInsurers”)  GuidelinesonEnvironmentalRiskManagement(AssetManagers)(“GuidelinesforAssetManagers”) TheGuidelinesaimtoenhancethebankingandinsurancesectors’resiliencetoandmanagementofenvironmentalriskbysettingoutsoundriskmanagementpractice,aswellastoenhancetheresilienceoffunds(includingrealestateinvestmenttrusts(“REITs”))andsegregatedmandates(“funds/mandates”)thataremanagedbyassetmanagersbysettingoutsoundenvironmentalriskmanagementpracticesthatassetmanagerscanadopt. InconjunctionwiththeissueoftheGuidelines,MASissuedthreesetsofResponsetofeedbackreceivedontheconsultationpapersissuedon25June2020(“consultationpapers”).MASstatesthatithadcarefullyconsideredthefeedbackreceivedandhasincorporatedthemasappropriate. SetoutbelowisanoverviewofhowtheGuidelinesapplytoFIsandtheiractivities,aswellastheexpectedimplementationapproach. ApplicabilitytoFIsandtheiractivities TheGuidelinesapplytoFIsandtheiractivitiesasfollows: Banks:TheGuidelinesforBanksapplytoallbanks,merchantbanksandfinancecompaniesinSingapore.Itappliestobanksextendingcredittocorporatecustomers,underwritingcapitalmarkettransactions,andotheractivitiesthatexposebankstomaterialenvironmentalrisk,aswellasonagroupbasisforlocally-incorporatedbanks.Banksthatarebranchesorsubsidiariesofglobalgroupsmaytakeguidancefromtheirgroup’senvironmentalriskmanagementframeworksthatmeettheguidelines’expectations.BankswithmaterialinvestmentactivitiesthattheyhavediscretionaryauthorityovershouldrefertotheGuidelinesforAssetManagersforsoundpracticesonthemanagementofenvironmentalriskwithrespecttoinvestments.Banksareexpectedtoapplytheguidelinestobothexistingandnewcreditfacilitiesandcapitalmarkettransactions. Insurers:TheGuidelinesforInsurersapplytoallinsurers,includinginsurerscarryingonbusinessinSingaporeunderaforeigninsurerschemeestablishedunderPartIIAoftheInsuranceAct.Itappliestoinsurers’underwritingandinvestmentactivities,andotheractivitiesthatexposeinsurerstomaterialenvironmentalrisk,aswellasonagroupbasisforlocally-incorporatedinsurers.Insurersthatarebranchesorsubsidiariesofglobalgroupsmaytakeguidancefromtheirgroup’senvironmentalriskmanagementframeworksthatmeettheguidelines’expectations.Insurersareexpectedtoapplytheguidelinestobothexistingandnewbusinesses. Whereinvestmentsareconcerned,insurersshouldputinplaceappropriateprocessesandsystemstomonitor,assessandmanagethepotentialandactualimpactofenvironmentalriskonindividualinvestmentsandportfoliosonanongoingbasis,wherematerial.Insurersshouldconsiderengagingwithcompaniesindividuallyandassetmanagers,asappropriate,tohelpshapethecorporatebehaviourofinvesteecompaniespositivelythroughengagement,proxyvotingandsectorcollaboration,includingbysupportinginvesteecompanies’effortstotransitiontowardsmoresustainablebusinesspractices,whilemaintainingriskmanagementstandards. InsurerswithinvestmentactivitiesshouldalsorefertotheGuidelinesforAssetManagersforsoundpracticesonthemanagementofenvironmentalriskwithrespecttoinvestments.  Assetmanagers:TheGuidelinesforAssetManagersapplytoallholdersofacapitalmarketsserviceslicenceforfundmanagement(LFMC)andREITmanagement,andtofundmanagementcompaniesregistered(RFMC)undertheSecondScheduletotheSecuritiesandFutures(LicensingandConductofBusiness)Regulations.Assetmanagerswhicharepartofglobalgroupsmaytakeguidancefromorleveragetheirgroup’senvironmentalriskmanagementgovernancestructure,frameworkandpoliciesthataredeterminedbyassetmanagerstomeettheprinciplessetoutintheguidelines. TheGuidelinesforAssetManagerswouldgenerallybeapplicabletoassetmanagersthathavediscretionaryauthorityovertheinvestmentsofthefunds/mandatesthattheyaremanaging,andwouldnotapplytoassetmanagersthatdonothavediscretionaryauthorityovertheinvestmentsofthefunds/mandates.Theguidelinesarealsoapplicabletobankswithmaterialinvestmentactivitiesthattheyhavediscretionaryauthorityover. Assetmanagersshouldconveytheirexpectationsonenvironmentalriskmanagementtosub-managersandadvisorsthatinvestmentmanagementhasbeendelegatedtoasassetmanagersretainoverallresponsibilityforenvironmentriskmanagement.Further,assetmanagersshouldputinplaceappropriateprocessesandprocedurestoassessandmonitorthesub-managers’oradvisors’compliancewithexpectationsset.  Implementationapproach Intheconsultationpapers,MASproposedtoprovideatransitionperiodof12monthsaftertheGuidelinesareissued.Intheresponses,MASstateditwillextendthetransitionperiodfrom12monthsto18months,recognisingthatFIsmayfaceinitialchallengesinimplementingtheGuidelines,andthattheapproachestomanaginganddisclosingenvironmentalriskareexpectedtomatureasthemethodologiesforassessing,monitoringandreportingsuchriskevolve. MASstatesthatFIsshouldstrivetoimplementtheGuidelinesassoonaspossible,anddemonstrateevidenceofimplementationprogressoverthetransitionperiod.Further,MASwillstartengagingFIsontheirimplementationprogressfromQ22021. Inparticular,banksandinsurersshouldstrivetomaketheirfirstdisclosureassoonaspracticableaftertheapplicableGuidelineshavebeenissuedandwithinthetransitionperiod.Thefirstdisclosuresshouldbemadeinthebank’sorinsurer’snextannualreport/sustainabilityreportfollowingtheendofthe18-monthtransitionperiodandonitswebsiteimmediatelyafterthe18-monthtransitionperiod. AssetmanagersshouldstrivetoimplementtheapplicableGuidelinesassoonaspossible,andinphaseswherepracticable,e.g.assetmanagerscouldstartwithestablishinggovernancestructuresandaccountability. TheGuidelinesstatethattheFIsshouldimplementtheGuidelinesinawaythatiscommensuratewiththesizeandnatureoftheiractivitiesaswellastheirriskprofile,includingtheinvestmentfocusandstrategyofthefunds/mandatesofassetmanagers.Inparticular,theGuidelinesforAssetManagersdonotprohibitorrestrictassetmanagersfromcomplyingwithapplicablelawsanddischargingtheirfiduciarydutiesandotherlegalobligationstotheircustomers. Referencematerials ThefollowingmaterialsareavailablefromtheMASwebsitewww.mas.gov.sg: GuidelinesonEnvironmentalRiskManagement(Banks) GuidelinesonEnvironmentalRiskManagement(Insurers)   GuidelinesonEnvironmentalRiskManagement(AssetManagers) ResponsetoFeedbackReceivedforProposedGuidelinesonEnvironmentalRiskManagementforBanks  ResponsetoFeedbackReceivedforProposedGuidelinesonEnvironmentalRiskManagementforInsurers  ResponsetoFeedbackReceivedforProposedGuidelinesonEnvironmentalRiskManagementforAssetManagers   Allen&GledhillRegulatory&Compliance Toassistourclientswithcompliancematters,ourconsultancyarm,Allen&GledhillRegulatory&Compliance,providesarangeofservicesandsolutions.Shouldyouhaveanyqueriesrelatingtocomplianceissuesarisingoutofthesedevelopments,pleasecontact: [email protected] Shareviaemail ShareviaLinkedin Joinourmailinglist Publications BacktoPublications Contacts: AdrianAng Singapore +6568907710 [email protected] FrancisMok Singapore +6568907786 [email protected] CatherineNeo Singapore +6568907195 [email protected] KarenTiah Singapore +6568907741 [email protected] Close Thissiteusescookiesandbyusingthesiteyouareconsentingtothis.Findoutwhyweusecookiesandhowtomanageyoursettings.Moreaboutcookies