Singapore issues guidelines for ESG retail funds to reduce 'greenwashing' risks

Singapore’s central bank has issued new disclosure and reporting guidelines for retail ESG funds, including requiring them to provide details on their investment strategy, as regulators globally seek to reduce the risk of “greenwashing”.

Environmental, Social, and Governance (ESG) funds sold to retail investors will have to give details such as investment strategy and criteria and metrics used to select investments, as well as risks associated with a fund’s strategy, the Monetary Authority of Singapore (MAS) said in its annual sustainability report issued on Thursday.

The measures come into effect from next January.

The move by the MAS comes as the volume of money flowing into funds that tout their ESG credentials has risen sharply globally and regulators warn about the risk of greenwashing, where the environmental benefits of an investment might be misleading, as well as a lack of reliability and comparability of ESG data disclosed.

Singapore’s central bank said the new disclosures will need be made on an ongoing basis, and investors will receive annual updates on how well the fund has achieved its ESG focus.

The MAS also said it will shift its equities investments towards exposures that are less carbon-intensive and more aligned with a low-carbon transition, starting from next year.

The equities and corporate bonds of companies which derive more than 10% of their revenues from thermal coal mining and oil sands activities will be gradually excluded from MAS’s portfolio.

“Such companies have high transition risks but limited long-term prospects as the world transits to the use of cleaner or renewable sources of energy,” Ravi Menon, managing director at the MAS, told a news conference.

“The exclusion will minimise our portfolio exposures to companies with the largest risk of asset stranding,” he said.

As a result of these climate portfolio actions, MAS expects the weighted average carbon intensity of its equities portfolio to be cut by up to 50% by 2030, compared to the base year of 2018.

“There will be no sacrifice in (investment) returns”, Menon said, adding that thermal coal mining and oil sands have a high chance of becoming stranded assets.


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