The Monetary Authority of Singapore (MAS) has released new supervisory guidance aimed at strengthening how financial institutions manage climate-related risks, issuing updated environmental risk management guidelines focused on transition planning.
The regulator published three sets of Guidelines on Environmental Risk Management – Transition Planning, which outline MAS’ expectations for banks, insurers and asset managers in addressing both the physical and transition risks associated with climate change.
The guidance acts as an addendum to MAS’ earlier environmental risk management guidelines introduced in 2020 and represents a further step in embedding climate considerations into the financial sector’s risk management frameworks.
The new guidelines are designed to help financial institutions build stronger risk assessment and management capabilities in response to environmental challenges. MAS said firms should implement transition planning processes in a risk-proportionate manner, reflecting the nature of their business models and the local conditions in which they operate.
Under the framework, financial institutions are expected to evaluate and manage climate-related risks in a forward-looking way, ensuring that governance structures, business strategies and risk management practices are adapted to account for both physical risks from climate events and transition risks linked to the global shift toward lower-carbon economies.
MAS also emphasised the importance of engagement with customers and investee companies. Financial institutions are encouraged to work closely with the organisations they finance or insure to better understand their exposure to climate risks and how those risks are being managed.
The regulator highlighted that such engagement should help avoid indiscriminate withdrawal of credit, insurance coverage or investment from sectors undergoing transition. Instead, institutions should take a balanced approach that considers the materiality of climate risks associated with individual clients and portfolios when gathering and analysing data.
Another key expectation is that financial institutions must continually enhance their knowledge and capabilities in climate risk measurement and management. MAS noted that methodologies, data quality and analytical tools in this area are still evolving, and institutions must keep pace with developments to ensure their risk frameworks remain effective.
Separate guidelines were produced for banks, insurers and asset managers in recognition of the different structures and operating models across the financial services industry. MAS said the guidance reflects feedback gathered through public consultation and ongoing engagement with industry participants.
Financial institutions will have time to prepare for the new requirements. The guidelines will take effect in September 2027, following an 18-month transition period intended to allow firms to strengthen internal capabilities and integrate climate considerations into existing risk management frameworks.
Monetary Authority of Singapore deputy managing director (financial supervision) Ho Hern Shin said, “These Guidelines support FIs in building their risk management capabilities in response to both physical and transition risks. The financial sector plays an important role in supporting customers as they navigate the risks from climate change. By engaging their customers and investee companies in a risk proportionate manner, FIs can build better resilience to risks and support broader financial stability.”
The new framework signals MAS’ continued focus on climate risk governance and reinforces the growing expectation that financial institutions integrate environmental risk into core strategic and operational decision-making processes.
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