Fund managers required to disclose strategies, metrics of ESG funds in 2023
Janice Lim
FROM Jan 1, 2023, fund managers in Singapore will be required to disclose the investment strategies, metrics and criteria of retail funds sold with the environmental, social and governance (ESG) label, under the Monetary Authority of Singapore’s (MAS) efforts to tackle greenwashing.
Unveiling this set of disclosure requirements on Thursday (Jul 28), alongside the release of the central bank’s second sustainability report, MAS managing director Ravi Menon said the new guidelines would help retail investors better understand the ESG funds they invest in.
MAS announced in June last year that it intended to set out disclosure standards on retail ESG funds early this year.
The latest disclosure requirements on retail ESG funds in Singapore follow allegations of greenwashing hitting ESG investing overseas, with prominent financial institutions like Deutsche Bank and Goldman Sachs being investigated on the extent of how green their funds really were.
Concerns over greenwashing have also been cited as one reason for record outflows from ESG funds in recent months.
In a circular to fund managers released on Thursday (Jul 28), MAS stated that the prospectus of an ESG fund should state its focus, such as decarbonisation for example; it should also state the metrics used to measure the fund’s progress in attaining its stated sustainability goals.
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The investment strategy used to achieve the fund’s ESG focus, its asset allocation and the associated risks would also have to be included.
The guidelines stated that at least two-third’s of the fund’s net asset value should be in sustainability investments.
The MAS will also require fund managers to disclose this information on an ongoing basis and produce an annual report.
Revealing more details about the new requirements to the media on Thursday, Ho Hern Shin, deputy managing director of financial supervision at MAS, said the funds would not be rated or coded by colours, but that these disclosures would enable retail investors to compare the investment strategies of the various ESG funds.
Menon said colour codings might force-fit ESG funds and oversimplify their differences; having these disclosure requirements, on the other hand, sets the fine gradations in risks and returns.
When asked how these disclosure requirements would be enforced, Ho said MAS will be “working very closely” with fund managers.
Menon added: “Let me assure you, if the MAS calls up a fund manager to a meeting here, that usually sends a message across. We don’t have to take any other action besides that.”
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