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* 1. MAS proposes to apply the Guidelines to all banks, merchant banks and finance companies (collectively referred to as “banks”) as follows:

(a) banks licensed under section 4(1) of the Banking Act (Cap. 19);

(b) merchant banks approved under section 28(2) of the Monetary Authority of Singapore Act (Cap. 186); and

(c) finance companies licensed under section 3(1) of the Finance Companies Act (Cap. 108).


MAS proposes to apply the Guidelines to banks’ extension of credit to corporate customers and underwriting for capital market transactions. A bank should also apply the Guidelines to other activities that expose it to material environmental risk. In particular, banks with material investment activities should refer to the relevant sections of the Guidelines on Environmental Risk Management for Asset Managers, for sound practices on the management of environmental risk with respect to investments.

 Question 1. MAS seeks comments on the entities and business activities that are in the proposed scope of the Guidelines.

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* 2. The Guidelines set out MAS’ expectations on the Board and senior management to incorporate environmental considerations into the bank’s risk appetite, strategies and business plans, and to effectively oversee the bank’s environmental risk management. 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 also proposes that the Board ensure that environmental risk, where material, is addressed in the bank’s risk appetite framework, so that environmental risk exposures beyond the bank’s risk appetite can be promptly recognised and addressed. The proposed responsibilities of senior management include developing an environmental risk management framework and policies, regularly reviewing their effectiveness, and allocating adequate resources to manage environmental risk.

MAS further proposes that where environmental risk is deemed material to a bank, the bank should designate a senior management member or a committee to oversee environmental risk. This would promote clarity in accountability over environmental risk management, to ensure that such issues are reviewed at a sufficiently senior level.

Question 2. MAS seeks comments on the proposed responsibilities of the Board in overseeing environmental risk management, including its role in ensuring that environmental risk, where material, is addressed in the bank’s risk appetite framework.

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* 3. Question 3. MAS seeks comments on the proposed responsibilities of senior management in overseeing environmental risk management, including its role in developing an environmental risk management framework and policies, regularly reviewing their effectiveness, and allocating adequate resources to manage environmental risk.

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* 4. Question 4. MAS seeks comments on the proposal for banks to designate a senior management member or a committee to oversee environmental risk, where such risk is material.

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* 5. At the customer level, MAS proposes for the bank to undertake an environmental risk assessment of each customer as part of its assessment process for credit facilities or capital markets transactions, particularly for sectors with higher environmental risk. To inform its assessment, the bank should develop sector-specific policies, which articulate its expectations towards customers in sectors with higher environmental risk. For transactions with higher environmental risk, MAS proposes for the bank to undertake enhanced due diligence, and escalate to an internal committee or appointed individual for approval where applicable. Such processes are intended to bring about a greater level of scrutiny and accountability on such transactions, and ensure that the bank’s exposures to environmental risk are well understood and managed. The bank should also engage each customer that poses higher risk, to improve its environmental risk profile, and support its transition towards sustainable business practices. For a customer that does not manage its environmental risk adequately, the Guidelines propose a range of mitigating options for banks, including reflecting the cost of the additional risk in the loan pricing, applying limits on the loan exposure, and re-assessing the customer relationship.

At the portfolio level, MAS proposes for the bank to develop tools and metrics to monitor and assess its exposures to environmental risk. Such tools would enhance the bank’s capacity to measure the impact of environmental risk on its business, and take appropriate mitigating measures to manage significant risk in its portfolio. For example, these metrics may be used to assess the bank’s portfolio exposures to geographical areas and sectors with higher environmental risk, measure the carbon intensity of customers in high-risk sectors, or consider the impact of environmental risk on its collateral valuations. MAS also proposes for the bank to develop capabilities in scenario analysis and stress testing to assess the impact of environmental risk on its risk profile and business strategies, and explore its resilience to financial losses. These scenarios should incorporate forward-looking information to complement historical data, as the latter might systemically underestimate potential risks, in view of the uncertainties and long-term horizon associated with changes in the environment.

Question 5. MAS seeks comments on the expectation for banks to engage each customer that poses higher environmental risk to improve its risk profile and support its transition towards sustainable business practices.

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* 6. Question 6. MAS seeks feedback on the expectation for banks to develop tools and metrics to monitor and assess their exposures to environmental risk, and examples of the aforementioned tools and metrics that may be adopted.

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* 7. Question 7. MAS seeks comments on whether there are specific aspects of environmental risk management policies and processes that would benefit from further supervisory guidance.

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* 8. MAS proposes that a bank disclose, at least annually, its approach to managing environmental risk and the potential impact of material environmental risk on the bank. The latter includes quantitative metrics such as exposures to sectors with higher environmental risk. A bank’s disclosure may be consolidated at the group or head office level.

MAS also proposes that banks take reference from international reporting frameworks, including the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (“TCFD”), to guide their environmental risk disclosures. The TCFD recommendations provide a useful framework for the disclosure of climate-related risks.

Question 8. MAS seeks comments on the proposed form and frequency of disclosure of environmental risk by a bank.

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* 9. Question 9. MAS seeks comments on any aspects of the Guidelines that have not been covered in earlier questions.

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* 10. Question 10. MAS requests for examples of sound risk management practices currently implemented by banks, which would meet the expectations in the Guidelines.

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* 11. Question 11. MAS seeks comments on the proposed implementation approach, including the proposed transition period of 12 months.

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* 12. CFA ID (Optional)

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