Singapore Releases ESG Fund Criteria to Lower Possibility of Greenwashing
As global authorities aim to decrease the risk of 'greenwashing,' Singapore's central bank has set new disclosure and reporting criteria for retail ESG funds, including asking them to provide details on their investing strategy.
In its annual sustainability report, the Monetary Authority of Singapore (MAS) stated that Environmental, Social, and Governance (ESG) funds sold to retail investors will be required to disclose their investment strategy, the criteria and metrics used to select investments, as well as the associated risks.
The move comes at a time when the amount of money flowing into funds that tout their ESG credentials has risen sharply worldwide and regulators warn about the risk of greenwashing, where the environmental benefits of an investment may be misleading, as well as a lack of reliability and comparability of ESG data disclosed.
The central bank of Singapore stated that the additional disclosures must be issued continuously, and investors would receive annual updates on the fund's ESG performance.
Starting next year, the MAS will move its equity investments towards exposures that are less carbon-intensive and better aligned with a low-carbon transition.
The equities and corporate bonds of companies that receive more than 10% of their revenue from oil sands and thermal coal mining will eventually be removed from the portfolio of MAS.
“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.
By 2030, MAS anticipates that its equity portfolio's weighted average carbon intensity will have decreased by up to 50% from the base year of 2018 as a result of these climate portfolio activities.
Source: Financial Post