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Singapore’s Fund Management Companies must meet new requirements for the management and disclosure of environmental risks from 7th June 2022. The guidelines were published in 2020, giving FMCs 18 months to get ready for implementation but it appears some Managers have a way to go. If you haven’t addressed all the requirements yet, or want to check whether you’re on track, there are some priority areas you should be looking at.
Who’s in scope?
The guidelines don’t apply to all FMCs – only to those that have discretionary authority over portfolios. So, if you’re a sub-Manager or adviser, you’re not in scope (although may be captured by similar requirements elsewhere).
There isn’t an AUM threshold although the MAS recognises that proportionality is important. The guidelines confirm that registered fund management companies (RFMCs) are on the hook (as well as Licenced FMCs and REIT Managers). Where Singapore FMCs delegate investment management to sub-managers (wherever they are based), they retain overall responsibility for compliance.
Materiality is key
The approach that FMCs need to take to adopt the guidelines depends on the materiality of environmental risks to the portfolios being managed, as well as the FMC’s overall ESG strategy. You therefore may want to start with the materiality assessment. Key inputs might include investment strategy, asset class, sector focus, and the characteristics of individual investee companies.
If you already have strong green credentials, then adopting the Guidelines might not require much more than dusting off your existing ESG policy.
What the guidelines require of you
Managers of both funds and segregated mandates are required to:
- articulate their ERM strategy
- have in place appropriate governance
- incorporate ERM into their overall risk management frameworks
- factor environmental risk (where material) into their research and portfolio construction processes
- exercise sound stewardship
- make appropriate disclosures to stakeholders.
What this looks like will depend very much on the nature of the portfolios being managed – there isn’t a “one size fits all” approach.
We’ve prepared a summary of the requirements which you can download here.
We can help
We have prepared a policy template as a starting point for MAS-licenced Fund Management Companies to document their approach to meeting the MAS’ ERM Guidelines. We can help you understand how the guidelines impact you and what you need to do to be compliant. Get in touch to find out more.