The Monetary Authority of Singapore (MAS) has issued new disclosure and reporting guidelines for fund managers to follow when they sell funds with environmental, social, and governance (ESG) labels to private investors in Singapore, as reported by Strait Times on July 28. With the new guidelines effective from January 2023, the MAS hopes to abate the risk of greenwashing and help retail investors better understand ESG funds. Under the new rules, ESG funds will need to provide information including their investment strategies, criteria used to select investments, as well as risks and limitations associated with those strategies. In addition, the guidelines regulated that at least two-thirds of the ESG fund’s net asset value should be in sustainability investments.

Greenwashing refers to making false or misleading claims that a company’s products are more environmentally sound than they actually are. If left unsupervised, companies that greenwash may reap the benefits of climate incentives and outcompete firms that expend extra costs on real green initiatives. Therefore, the MAS has asked funds to disclose how they fulfill their ESG initiatives on an ongoing basis and provide annual updates to their investors. The new guidelines are part of the measures announced in the MAS’s second annual report on how Singapore can build a more climate-resilient and sustainable financial sector. In the report, the MAS also vowed to allocate a USD100m budget to facilitate Singapore’s sustainable finance agenda in the next five years, following a total of USD115m funding for sustainable finance activities over the past three years.

Sources:

https://www.reuters.com/business/sustainable-business/singapore-cbank-issues-disclosure-reporting-guidelines-esg-funds-2022-07-28/

https://www.straitstimes.com/business/banking/mas-tackles-greenwashing-with-new-guidelines-for-esg-funds

https://www.businesstimes.com.sg/banking-finance/fund-managers-required-to-disclose-strategies-metrics-of-esg-funds-in-2023