In brief
Singapore’s central bank has asked banks to assess environmental risks that stem from their activities, especially those tied to haze. MAS directed banks to use data from the National Environment Agency and consider imposing conditions or limiting exposure to clients linked to pollution or deforestation. Clear violations of environmental laws would prompt banks to tighten or end relationships, all amid recent haze‑related atmospheric pollution episodes.
The Monetary Authority of Singapore (MAS) announced on Wednesday that banks must identify, assess and manage material environmental risks arising from their activities and exposures, with a particular focus on haze, pollution and deforestation. The guidance came after recent haze episodes that significantly reduced air quality across the island.
MAS said banks should use information released by the National Environment Agency (NEA) under the Transboundary Haze Pollution Act. Where customers may be linked to activities contributing to haze, banks should engage them to understand their involvement and assess whether adequate measures are in place to prevent, detect and stop fires. Banks are advised to take appropriate steps to mitigate heightened environmental risks, including imposing conditions, reviewing financing terms, limiting further exposure or reassessing customer relationships.
"Clear breaches of environmental laws would warrant stronger measures, including limiting exposures or exiting the relationship," MAS said in a statement. It added that it supported local banks’ clear stance against burning practices and that strong action would be taken where warranted.
In recent weeks, Singapore experienced prolonged haze that prompted the NEA to issue Preventive Measure Notices under the Transboundary Haze Pollution Act to companies that may have contributed to the haze. MAS’s directive follows the agency’s enforcement of the act, urging banking institutions to align their risk management practices with these regulatory actions.
Building on this policy shift, MAS highlighted that environmental risks are increasingly recognized as material financial risks. Banks are therefore encouraged to incorporate environmental data into their risk assessment frameworks, reassessing exposure to customers whose activities involve large-scale clearing of land or combustion that may lead to haze or air pollution. Where clear evidence of non‑compliance emerges, banks may need to step back or terminate the relationship.
This move comes at a time when environmental stewardship is becoming a key component of corporate governance. By integrating NEA data and adopting stricter risk controls, banks can mitigate potential reputational damage and financial losses that could arise from environmental mismanagement.
Alongside official guidance, civil society groups have been active in identifying haze‑source points. Greenpeace and Pantau Gambut, for instance, have mapped entities linked to haze in the region, offering another layer of information that banks could use to reinforce their risk assessment. These efforts underscore the growing consensus that environmental risks—particularly those stemming from deforestation and open burning—are significant threats to economic stability and public health.
MAS’s notice underscores the central bank’s role in embedding sustainability into everyday financial operations. It also signals a broader shift in Singapore’s financial sector towards climate‑consciousness, aligning regulatory expectations with global trends in environmental risk management.
