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Singapore central bank proposes rules for asset managers to manage environmental risk

MAS head office building in Singapore
By Asia Asset Management  
June 29, 2020

Singapore’s central bank wants asset managers in the city state to integrate environmental risk management into their investment decision-making processes and hold their senior management and board of directors more accountable under newly proposed guidelines.

The Monetary Authority of Singapore (MAS) unveiled the plan in a consultation paper last week.

According to the paper, senior management and boards of asset management companies are expected to "oversee the integration of environmental considerations into their strategies, business plans and products".

"The proposed responsibilities of the board include approving an environmental risk management framework and policies, and setting clear roles and responsibilities of the board and senior management," MAS says in the consultation paper released on June 23.

Among other things, it says senior management should develop an environmental risk management framework and policies for assets, regularly review their effectiveness, and allocate adequate resources to manage the assets.

If the risk is "deemed material' to funds or mandates managed, a senior management member or committee should be designated to oversee it.

"This would promote clarity in individual accountability over environmental risk management, to ensure such issues are reviewed at a sufficiently senior level," MAS says.

Most asset managers have already integrated environmental risk into their business strategies, or are in the process of doing so, and as such the guidelines would not have much impact, according to a fund manager at a local asset management firm.

But it may spur more managers to adopt environmental, social and governance (ESG) practices.

"Hopefully, the introduction of the guidelines will be a catalyst for the adoption of more ESG investing, sustainable investing and responsible investing strategies," the manager tells Asia Asset Management, speaking on condition of anonymity.

The consultation paper is posted on MAS’s website and is open for comments until August 7.