The Monetary Authority of Singapore (MAS) has released new supervisory guidelines outlining how financial institutions should strengthen their transition planning practices to address environmental and climate-related risks.
The new Guidelines on Environmental Risk Management – Transition Planning establish expectations for banks, insurers and asset managers on how they should assess and manage the risks arising from climate change.
The framework acts as an addendum to MAS’ earlier environmental risk management guidelines published in 2020, expanding on the regulator’s efforts to help the financial sector build resilience against climate-related threats.
The guidance focuses on both transition risks—arising from the shift towards a lower-carbon economy—and physical risks linked to climate change, such as extreme weather events.
MAS said the guidelines aim to help financial institutions develop stronger risk assessment and risk management capabilities while ensuring their strategies remain aligned with evolving environmental challenges.
Under the new expectations, financial institutions are required to adopt forward-looking approaches when assessing climate-related risks. This includes adapting their governance frameworks, business models and risk management practices to better account for environmental risks that may affect their portfolios and long-term financial stability.
A key component of the guidelines centres on engagement with customers and investee companies. MAS said institutions should actively work with their clients to understand how climate risks could affect their operations and the steps being taken to manage those risks. This engagement is intended to support a more orderly transition to a low-carbon economy while avoiding the sudden withdrawal of credit, insurance coverage or investment from companies facing environmental challenges.
The regulator emphasised that financial institutions should approach this engagement in a risk-proportionate manner, meaning the level of analysis and data collection should reflect the materiality of climate risk within a particular customer or investment. By improving transparency around climate exposure, institutions will be better positioned to manage risks while supporting broader financial stability.
MAS also noted that knowledge and tools used to measure climate risk continue to evolve. As a result, financial institutions are expected to continually strengthen their capabilities, keeping pace with new data sources, methodologies and best practices in environmental risk management.
Separate versions of the guidelines have been issued for banks, insurers and asset managers to reflect the different business models and operational structures across the financial sector. MAS said the final guidance was developed following feedback from an earlier public consultation as well as engagement with industry stakeholders.
The regulator confirmed that the new guidelines will come into force in September 2027, providing an 18-month transition period for financial institutions to implement the necessary processes and frameworks.
MAS deputy managing director for financial supervision Ho Hern Shin highlighted the importance of proactive climate risk management for the financial sector.
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 move reflects growing regulatory attention on climate risk management across global financial markets. Regulators increasingly expect financial institutions to embed environmental risk considerations into governance, strategy and portfolio management as climate change continues to reshape economic and financial systems.
Keep up with all the latest RegTech news here
Copyright © 2026 RegTech Analyst
Copyright © 2018 RegTech Analyst
