SINGAPORE: MAS Plans For ESG Rules, Pushes Transition Finance.

As published on financialpost.com, Thursday 20 April, 2023.

Singapore’s central bank proposed a slate of ESG regulations for financial institutions and listed companies on Thursday, demonstrating both the goal to align with emerging international standards and to accommodate Asian countries’ persistent need for financing in heavy-emitting and fossil fuel industries.

The Monetary Authority of Singapore and the stock exchange plan to require key financial institutions and listed companies to make ESG disclosures in line with rules being developed by the International Sustainability Standards Board, deputy prime minister Lawrence Wong said at an event in Singapore Thursday.

The ISSB rules, established by the London-based IFRS Foundation as a complement to its International Accounting Standards Board, are becoming a common template for Asian regulators. Hong Kong this month said it would mandate companies listed on its stock exchange to make climate disclosures based off the ISSB framework. China, which is considering making disclosures mandatory, has allowed the IFRS Foundation to open a Beijing office to promote ISSB standards there.

At the same time, Singapore is introducing a raft of measures to encourage transition finance in Asia. The central bank’s sustainable debt grant schemes will include bonds and loans designed to help heavy industries like steel and cement become more energy efficient and shrink their greenhouse gas emissions.

In Europe, which has been the global leader on green finance and ESG regulation, transition instruments are often viewed with skepticism. Banks that finance carbon-intensive industries have to account for those emissions in their disclosures, and proponents of aggressive action on climate change say that transition funding lets polluters off the hook.

Asian countries and regulators have pushed back, saying that the transition away from fossil fuels will be very expensive — and is largely a solution to a problem for which they bear little historical responsibility.

“No amount of new green projects will get us to net zero,” Wong said. “We need to resolve everything that’s existing today and especially in Asia where 60% of the electricity is generated by coal plants. So how do we bring about a more orderly and responsible phasing out of coal plants in Asia, while safeguarding the lives and livelihoods of people in this region.”

MAS is also working with the International Energy Agency to develop decarbonization pathways for emissions-heavy sectors in the region. That will help financial institutions “reference these pathways when they set emissions reduction targets, and when they engage with their clients on initiatives to decarbonize their businesses,” Wong said.

Wong said that Singapore would work to increase blended finance for phasing out coal-fired power plants and other transition activities. Southeast Asian states last month released an updated version of a taxonomy that included the phasing out of coal assets.

MAS is also developing a code of conduct for firms like MSCI and S&P that provide ESG ratings and data and wants them to disclose how transition risks are factored into their products.

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