The Monetary Authority of Singapore publishes guidelines on transition planning for banks, asset managers and insurers

On 5 March 2026, the Monetary Authority of Singapore (MAS) published Guidelines on Environmental Risk Management - Transition Planning (the Guidelines) for banks, insurers and asset managers (collectively, the FIs). 

The Guidelines set out MAS’ supervisory expectations for FIs to assess and manage the transition and physical risks they face from climate change (being ‘climate-related risks’) as part of a sound transition planning process (see MAS’ press release).

The Guidelines are intended to supplement and be an addendum to MAS’ Environmental Risk Management (ENRM) Guidelines for banks, insurers and asset managers, setting out incremental requirements in relation to the respective FIs’ transition planning process.

The Guidelines follow a consultation process launched in October 2023 (the 2023 Consultation Guidelines).  MAS also published a “Response to Feedback Received on Proposed Guidelines on Transition Planning” for each of banks, insurers and asset managers (the Response).

MAS has generally adopted a more practical approach to ESG than some other jurisdictions, and the Guidelines reflect this by allowing for some flexibility in how in-scope entities or branches can implement the Guidelines, such as through a risk-proportionate approach. 

In this blog, we summarise the key points in the Guidelines:

How is “Transition Planning” defined?

The definition of “transition planning” refers to the internal risk management processes and strategic planning undertaken by an entity to prepare for climate-related risks and potential changes in business models associated with climate change. This includes building resilience to a range of future states of the world (including varying degrees of physical risk, and potential shifts in policy, technology, or consumer sentiments).

A “transition plan” refers to a documented output of the transition planning process and can be internal documents or be externally disclosed. 

What are the objectives of the Guidelines?

The objective of the Guidelines is for FIs to implement a sound internal process that: 

• adequately addresses their climate-related risks (being both physical and transition risks). FIs should understand the implications of climate change on their business and (for asset managers) investment portfolios and adapt their business models, governance and risk management practices accordingly. FIs should have a structured, risk-proportionate process to engage customers, asset managers, investees etc, on the material climate-related risks they face and their management of such risks.

• facilitates climate-related risk management (including risk mitigating actions and adaptation measures) by customers / investees / investee companies, thereby supporting broader financial stability.   Banks should not indiscriminately withdraw credit from customers with higher climate-related risks but should seek to engage these customers in a risk-proportionate manner, and provide them with an opportunity to identify and manage climate-related risks to address the banks’ concerns. Similarly, asset managers should not indiscriminately divest from investee companies with higher climate-related risks and insurers should not indiscriminately withdraw insurance coverage and investment from customers or investees with higher climate-related risks, but should seek to engage these investee companies / customers / investees in a risk-proportionate manner.

Where FIs have chosen to set targets, the Guidelines state that they need sound internal processes to manage any material risks arising from those targets, such as by having an effective strategy to address any potential legal and/or reputational risks due to deviations from any communicated targets.

Who do the Guidelines apply to? 

Banks

The Guidelines will apply to banks, merchant banks and finance companies in Singapore (altogether, “banks”). The Guidelines will apply to the following activities by banks:

• extension of credit to corporate customers;

• underwriting for capital market transactions; and

• other activities exposing banks to material environmental risk.

The Guidelines are applicable on a group basis for locally-incorporated banks that are headquartered in Singapore. The Guidelines will also apply to Singapore branches or subsidiaries of foreign banks. Helpfully, banks that are branches or subsidiaries of global groups may take guidance from their wider group’s transition planning as long as the approach meets the expectations set out in the Guidelines. 

Asset Managers 

The Guidelines will apply to asset managers that are holders of a capital markets services licence for fund management and real estate investment trust management. 

The Guidelines are applicable to asset managers which have discretionary authority over the investment portfolios that they are managing. 

Even where they delegate the investment of such portfolios to sub-managers or advisers, the asset manager is still expected to retain overall responsibility for the management of climate-related risks and should communicate their expectations (such as through contractual agreements) on climate-related risk management to the sub-managers or advisors, and put in place processes to monitor the sub-managers’ or advisors’ alignment with these expectations.

The Guidelines will also apply to Singapore branches or subsidiaries of foreign asset managers. Again, asset managers that are branches or subsidiaries of global groups may take guidance from their wider group’s transition planning as long as the approach meets the expectations set out in the Guidelines. 

Insurers

The Guidelines are applicable to insurers providing insurance coverage to corporate customers, insurers’ investment activities, and other activities that expose insurers to material environmental risk. They apply to all MAS-licensed insurers, including insurers carrying on business in Singapore under a foreign insurer scheme established under part 2A of the Insurance Act 1966.

The Guidelines are applicable on a group basis for locally-incorporated insurers that are headquartered in Singapore. The Guidelines will also apply to Singapore branches or subsidiaries of foreign insurers. Insurers that are branches or subsidiaries of global groups may take guidance from their wider group’s transition planning as long as the approach meets the expectations set out in the Guidelines.

What are the key provisions in the Guidance?

While the underlying risk principles are similar, the Guidelines were developed recognising the different business models and needs of Fls in banking, insurance, and asset management. We have summarised below the key risk principles. 

Governance and strategy

The ENRM Guidelines set out MAS’ expectation for the Board and senior management to incorporate environmental considerations into the Fls’ risk appetite, strategies and business plans, and to maintain effective oversight of the Fls’ environment risk management and disclosure.

In addition to the ENRM Guidelines, the Guidelines set out that decisions made by Fls’ board and senior management around business strategy and risk appetite should take into consideration how current and future changes in the operating environment arising from climate change will impact the FI’s (or, if applicable, its investment portfolios’) risk profile.

Further, the Guidelines set out that Fls’ senior management should:

• actively ensure that the climate-related business strategy and risk appetite are effectively embedded within their operations (MAS has included non-exhaustive steps that Fls’ senior management could take); and

• establish a mechanism(s) through which the Fls’ existing approach to respond to climate-related risks is regularly reviewed and refined.

Risk management

Customer engagement (for banks and insurers in respect of underwriting)

The Guidelines set out that customer engagement is a means for banks and insurers to manage their climate-related risks arising from exposures to their customers.

FIs should: 

• have a structured process to engage customers on the climate-related risks that they face and their response to such risks;

• engage customers on a risk-proportionate basis;

• collect sufficient climate-related risk data about the potential impact of climate change on customers’ business and risk profiles, so as to inform risk decisions and account management strategies (for banks) and underwriting strategies (for insurers); and

• for banks, not indiscriminately divest or withdraw financing from customers exposed to higher climate-related risks and, for insurers, not indiscriminately withdraw insurance coverage from customers exposed to higher climate-related risks.

Banks and insurers will need to consider carefully how to implement such a “structured process” to engage customers and where, and how, they can use a risk-proportionate approach to implement the Guidelines in a practical manner.

Engagement with asset managers and investees (for insurers in respect of investments)

The Guidelines set out that engagement with asset managers and investees is a means for insurers to manage their climate-related risks from exposures through their investments, which may materialise over an extended period.

The insurer should: 

• have a structured process to engage asset managers and investees on the climate-related risks that they face and their response to such risks;

• engage asset managers and investees on a risk-proportionate basis;

• seek to collect sufficient climate-related risk data about the potential impact of climate change on the insurer’s investment portfolio, so as to inform its risk decisions and investment management strategies; and

• not indiscriminately divest from investees exposed to higher climate related risks.

As above, insurers will need to consider carefully how to implement a “structured process” to engage with asset managers and investees in a risk-proportionate manner.

Engagement and stewardship (for asset managers)

The Guidelines set out that active engagement and stewardship by the asset manager can facilitate the risk management measures taken by investee companies, thereby mitigating portfolios’ exposure to climate related risks.

The asset manager should: 

• develop an engagement and stewardship plan to support its overall strategy to address climate-related risks in its portfolios;

• equip its staff to effectively engage investee companies by ensuring that they have sufficient understanding of sectoral and jurisdictional specificities and developments;

• have a structured process to engage investee companies on the climate-related risks that they face and their response to such risks;

• engage investee companies on a risk-proportionate basis;

• seek to collect sufficient climate-related risk data about the potential impact of climate change on investee companies’ business and risk profiles, so as to inform its investment and risk decisions and portfolio management strategies; and

• not indiscriminately divest from investee companies exposed to higher climate-related risks.

The Guidelines do not limit this engagement obligation to portfolios which have ESG goals, meaning asset managers may need to apply these principles across all their portfolios. 

Portfolio management approach (banks, insurers (when dealing in investments) and asset managers) and risk selection in underwriting (for insurers)

Fls are to:

• account for sectoral specificities and, where appropriate, take a differentiated approach for sectors posing higher climate-related risks in their transition planning; and

• factor in different characteristics of customers or investee companies (e.g. different levels and sources of climate-related risks, different stages of readiness) and take a differentiated approach, where appropriate, in their transition planning.

This part of the Guidelines is helpful in allowing banks, asset managers and insurers to adopt a more nuanced approach to its transition planning and consider the circumstances of each customer/investee company in the implementation of the Guidelines. Nonetheless, the Guidelines stipulates that banks and insurers “should address climate-related risks across its customer base comprehensively” (emphasis added).

For asset managers, they are also expected to consider the potential impact of climate-related risks as appropriate (e.g., stranded asset risk, runaway climate change) in developing their product offerings and investment management strategies.

Portfolio management (for banks, insurers and asset managers)

Forward looking risk assessment tools

Fls should:

• (or, for asset managers, “may”) employ a range of forward-looking tools, such as scenario analysis (and, for banks and insurers, stress testing), in its transition planning process for risk discovery and quantification; 

• continue to develop its capabilities in climate scenario analysis (and, for banks and insurers, stress testing), referencing leading industry practices wherever possible; and

• endeavour to address material data gaps to allow it to adequately capture and differentiate the level of climate-related risks that its customers / counterparties / investee companies face.

Data and metrics

Fls should:

• recognise the inherent limitations of using proxy data to bridge data gaps when performing its climate-related risk assessments;

• use metrics to track its risk exposures and determine if its risk exposures are in line with its risk appetite and associated targets (or for asset managers, use metrics to track its investment portfolios’ risk exposures and determine if they are in line with its business strategy, the portfolios’ investment strategies and associated targets); and

• consider the impact of any targets set (or lack of target) on the FIs’ business strategy and risk profile (or for asset managers, the risk profiles of the investment portfolios that it manages), with residual risks identified and addressed.

This section of the Guidelines is helpful in acknowledging the limitations in current ESG data available, although the Guidelines do state that “the use of proxy data should not detract from longer-term efforts to obtain primary data that is more decision-useful”.

Implementation strategy (people, process, systems)

Fls should:

• equip its staff, including through capacity building and training, with adequate expertise to assess, manage and monitor climate-related risks in a rigorous, timely and efficient manner;

• regularly review its internal governance and processes, including its risk management framework, to manage climate-related risks in a systematic manner; and

• develop and implement a data strategy to build, maintain and analyse relevant climate-related data to support effective decision-making.

When do the Guidelines apply? 

The Guidelines will take effect from September 2027, after an 18-month transition period.

FIs should consider what preparatory work needs to be done to implement the Guidelines by the deadline and what “uplift” may be required to workstreams and processes already in place.

International financial groups may be able to build upon work done in respect of other regulatory requirements (for example, implementing Sustainable Finance Disclosure Regulation (SFDR) or the European Banking Authority (EBA)’s guidelines on environmental scenario analysis), to assist with the work involved in implementing the Guidelines.

What are the notable changes from the consultation?

Key amendments in the Guidelines from the 2023 Consultation Guidelines include:

• Emphasis on risk management: The Guidelines reinforce MAS’ approach that the emphasis is on environmental risk management, rather than broader transition strategy. Where respondents in the 2023 Consultation Guidelines said that they viewed transition planning as driven by strategic business objectives rather than by risk management objectives, MAS’ responded that “… It is important for banks to comprehensively consider both business strategies and risk management when responding to financial risks and opportunities from climate change. The [Guidelines] are not intended to affect banks’ commercial decisions, including their business strategies, other than where such decisions could affect their safety and soundness.”

• Disclosures: One of the significant structural changes in the Guidelines is the removal of the “Disclosure” section that appeared in the 2023 Consultation Guidelines. The rationale for this was the development of international disclosure standards since the consultation (notably the adoption of the ISSB standards – see our Quick Guide). Instead, FIs are directed to continue referring to MAS’s existing ENRM Guidelines on disclosures. 

• Environmental risks beyond climate: MAS recognised that while progress is being made to incorporate broader environmental considerations (beyond climate) within transition planning, this will take time and therefore the Guidelines have been revised to soften some of the previous requirements around applying safeguards against other environmental risks. Nonetheless, banks, insurers and asset managers are still required to “consider” whether risk management measures to address other environmental risks are necessary.

• Engagement with customers: The previous drafts stated that banks and insurers should “steer” customers in managing their transition-related risks. In response to industry feedback, MAS has recognised that FIs are not directly responsible for, and may have limited influence on, the business decisions made by their customers. Nonetheless, banks and insurers can raise customers’ climate-related risk awareness and encourage them to implement robust risk management measures. MAS has therefore removed the wording regarding “steering” customers and replaced this with softer “engagement” wording. The Guidelines also emphasise implementation of a “risk-proportionate” approach and recognises some of the practical constraints, for example, around data collection (particularly for SMEs).  

• Targets: MAS confirmed it does not require FIs to set decarbonisation targets, with FIs having the flexibility to select a range of metrics in support of their risk appetite statements. Nonetheless, banks, insurers and asset managers are required to consider the impact of any targets set “or lack thereof” on its business strategy and risk profile.

• Transition period: MAS has extended the transition period from 12 months to 18 months (effective September 2027) to provide FIs with sufficient time to implement the Guidelines.

Broader international developments

Transition plans remain a focal point globally due to a combination of corporate buy-in, regulatory expectations and investor pressure.

Disclosures relating to transition plans are covered by various global, voluntary disclosure frameworks developed by organisations such as the Taskforce on Climate-related Financial Disclosures (TCFD), the International Sustainability Standards Board (ISSB), the Transition Plan Taskforce (TPT) and the Glasgow Financial Alliance for Net Zero (GFANZ).

In the EU, although the Corporate Sustainability Due Diligence Directive (CSDDD or CS3D), as amended by the Omnibus I changes, will no longer mandate the adoption of transition plans by in-scope companies, the Corporate Sustainability Reporting Directive (CSRD) still requires in-scope companies to disclose a transition plan if they have one.

In the UK, the government is still deciding whether to make transition plans mandatory. 

MAS’ supervisory expectations around transition planning set out in the Guidelines is another example of the growing international momentum around climate transition plans. 

Read our Quick Guide which covers transition plan requirements under various mandatory, voluntary and proposed regimes. 

For more information on climate transition plans – see our dedicated webpage: Climate transition planning & finance