Don’t abandon carbon: a Singapore take on net zero
Asiamoney is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Don’t abandon carbon: a Singapore take on net zero

The Singapore regulator MAS has set guidelines for banks transitioning to net zero. Unusually, it cautions against moving too fast.

Carbon Neutral and ESG Concepts. Carbon Emission, Clean Energy. Globe Balancing between a Green leaf and CO2. Sustainable Resources, Big deal for Company and Indstry to Concern about Environmental
Photo: iStock

“Indiscriminate divestment from carbon-intensive activities will not get us to a net-zero world. A large part of the global economy depends on such activities for growth and jobs.”

A line like that might sound, in isolation, like a resource group lobbyist arguing against the dying of the light around their industry. But it is, in fact, Ravi Menon, managing director of the Monetary Authority of Singapore – and his comments come alongside a set of consultation papers guiding the country’s financial services sector towards net zero.

Menon’s point is that the journey to net zero is not about flamboyant headlines on casting off polluting clients, but instead a more nuanced position. “Financial institutions must actively support their borrowers, insured parties, and investee companies to progressively decarbonize their activities through credible transition plans,” he says.

One senses that the MAS is giving Singapore’s banks cover to do things properly, even if that involves short-term bad press

“We may have to accept short-term increases in financed, facilitated, or insurance-associated emissions arising from these plans provided these plans support climate-positive outcomes consistent with a net-zero pathway.” In getting there, “regulators must support financial institutions in such efforts.”

One senses that Menon, and the MAS, is giving Singapore’s banks cover to do things properly, even if that involves short-term bad press.

Southeast Asia has always been a place that challenges absolutist ideas about ESG. It is clearest, perhaps, in Malaysia. The attitude of the moment is that palm oil is bad. But if, say, the Employees Provident Fund, by far the country’s most powerful institutional investor, suddenly divests from palm oil en masse, what does that do to that essential local economy? There were 382,000 employees in the country’s palm oil sector in 2022. Many of them have their pensions handled by the EPF. The industry cannot simply be cut off.

Equally, a wholesale withdrawal of funding from the Indonesian resources industry would be catastrophic. In 2020, 250,000 people worked directly in mining in Indonesia, according to the Institute for Essential Services Reform, with a far larger number involved in the resources sector overall.


Singaporean institutions reach far into southeast Asia with their lending books and have already expressed policies about bolstering the sustainability of their supply chains and their clients. So, some guidance on how they handle polluting clients is important. The MAS has five key principles it wants its banks to consider.

The first is Menon’s point about engagement rather than divestment. Companies need banks to help them decarbonize.

Second, banks should “take a multi-year approach beyond the typical financing or investment time horizons, to facilitate a more comprehensive assessment of climate-related risks,” the MAS says.

The regulator also calls for a holistic treatment of risks, so as to fully understand the interconnections between them; the consideration of environmental risks beyond climate (such as biodiversity); and transparency of information.

Conspicuously absent in these detailed guidelines is any mention of carbon tax, pricing or trading. That’s for the good reason that none of these things represent the practical mainstream today – but it’s interesting that the MAS doesn’t suggest banks ought to be getting ahead in advance of some future expected obligation.

It’s worth remembering that the MAS was vocally supportive of the launch of Climate Impact X, a carbon exchange launched by DBS, Standard Chartered, the SGX and Temasek in 2021. And only in September this year, it published a working paper, alongside McKinsey & Co, about the use of high-integrity carbon credits to accelerate and scale the early retirement of coal-fired power plants in Asia.

But, for the moment, the MAS is more interested in stressing patience and cooperation. There is a deal being expressed to Singapore banks here: we’ll give you space as a regulator, and now you need to use it by going out and building transition plans with your clients. That is where progress will be made, rather than lopping off whole industries in pursuit of net zero.

Gift this article