Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Transition finance is the key to sustainability: MAS

© Shutterstock / mimisimPost Thumbnail

The Monetary Authority of Singapore (MAS) highlights the need for transition finance in helping achieve global net zero targets, especially in Asia.

While MAS has committed itself to the issuance of green bonds, and set rules for the avoidance of greenwash and aligned its own sustainability objectives with the recommendations of the Taskforce on Climate-related Financial Disclosure (TCFD), managing director Ravi Menon said that transition finance was going to be a key factor in achieving long term sustainable growth.

In a speech he highlighted that green finance is proving a success, with 2021 seeing issuance reach $800 billion, a ten-fold increase from 2015. But, he said: “Where the industry needs to do better is in transition finance – to provide the funding support for companies that are not so green, to become greener. Last year saw just twelve transition bonds issued globally, amounting to $4.4 billion.”

Transition finance vs. green finance

MAS laments the lack of specifically labelled transition financing as a challenge to achieving the net zero goals tied to energy transition, citing the relative disparity between the green bond (53% of the total) and transition bond (0.5%) issuance in the APAC region, and a high proportion of hard-to-abate sectors. Yet, Moody’s sees the challenge of transition finance in the region being remedied via sustainability linked bonds (SLBs) and other transition instruments.

Flexibility in the use of funds from SLBs, which are not tied to specific projects or assets, but contribute to issuers’ overall transition strategies, may be a stop gap solution. However, scrutiny from financial regulators and mandates limiting the proportion of SLBs in portfolios focused on transitions may require higher issuance of transition bonds.

Menon said that MAS is keen to promote blended finance solutions to help fill Asia’s transition financing gap and will be hosting a pre-COP27 conference on blended finance.

To TCFD and beyond

MAS expects to remain proactive on aligning with the latest global standards, updating its TCFD alignment with standards from ISSB, by which it is signalling its own financial institutions and listed companies in Singapore to incorporate sustainability disclosures.

Together with Banco Central do Brasil, Bank of England and Banque de France, MAS is among a handful of central banks already making TCFD-aligned disclosures. Guidelines published by the Network for Greening the Financial System (NGFS), a network of 114 central banks and supervisors, has also published guidelines for its members advocating alignment with TCFD.

Setting a good example

Central banks can play a pivotal role by setting the standards that banks and other financial institutions need to follow, with a consequent impact on the wider economy. MAS seeks to create a climate resilient financial sector by deepening climate scenario analysis through stress tests, and incorporating climate risks into its supervisory framework as well.

The NGFS’ directives are targeted not just at central banks, but policy makers as well. Setting guidelines for the entire financial system could also influence corporate behaviour and improve disclosures. Finally, as the supervisor of banks and financial institutions, central banks could also set guidelines for transferred assets, which are key risk factor in achieving decarbonisation in the oil and gas industry.


More from SG Voice

Latest Posts