Singapore’s MAS Issues New Climate Transition Planning Guidance for Financial Institutions

Key Takeaways

• MAS Issues Climate Transition Planning Guidelines: The Monetary Authority of Singapore released new Guidelines on Environmental Risk Management – Transition Planning for banks, insurers, and asset managers to strengthen how financial institutions manage climate-related risks.
• Focus on Physical and Transition Risks: Financial institutions are expected to assess both physical climate risks, such as extreme weather events, and transition risks tied to policy changes, technological shifts, and market adjustments linked to decarbonization.
• Greater Engagement with Clients and Portfolio Companies: MAS encourages institutions to work with customers and investee companies to better understand their climate exposures and transition strategies, helping avoid abrupt withdrawals of financing or insurance coverage.
• Sector-Specific Guidance for Financial Institutions: Separate guidelines were issued for banks, insurers, and asset managers to reflect differences in their business models and risk exposures.

Deep Dive

The Monetary Authority of Singapore has issued new supervisory guidance aimed at strengthening how financial institutions prepare for the economic transition associated with climate change. The regulator released three sets of Guidelines on Environmental Risk Management – Transition Planning, setting out expectations for banks, insurers, and asset managers on how to assess and manage climate-related risks within their business models and portfolios.

The guidance is about helping financial institutions move beyond high-level sustainability commitments and develop practical transition plans that address how climate-related risks could reshape their business models, portfolios, and long-term strategies.

MAS said the guidelines are designed to strengthen financial institutions’ ability to evaluate climate risks in a forward-looking way while maintaining resilience across the financial system.

From Climate Awareness to Transition Planning

The new guidance focuses on how financial institutions plan for the economic transition associated with climate change, particularly as governments, industries, and markets move toward lower-carbon systems.

MAS expects firms to assess both physical risks, such as extreme weather and environmental disruption, and transition risks, which may arise from policy shifts, technological change, or evolving market expectations tied to decarbonization.

The regulator also emphasized the role financial institutions play in working with their clients and portfolio companies during this transition.

Rather than pulling back financing or insurance coverage in response to climate-related exposures, MAS expects institutions to engage with customers and investee companies to better understand how they are managing climate risks and adapting their business strategies. This engagement, the regulator noted, should be proportionate to the level of risk associated with each relationship.

At the same time, financial institutions are expected to continue building internal expertise in climate risk measurement and management as analytical tools, data availability, and methodologies continue to evolve.

Tailored Expectations Across the Financial Sector

Recognizing that climate risks manifest differently across the financial industry, MAS released separate guidance for banks, insurers, and asset managers.

The regulator said the guidelines reflect differences in business models and risk exposures across these sectors, as well as feedback received during a public consultation and discussions with industry stakeholders.

Financial institutions will have time to prepare for the new expectations. MAS said the guidelines will take effect in September 2027, following an 18-month transition period intended to give firms time to strengthen governance frameworks, data capabilities, and risk management processes.

According to MAS, the guidance is part of a broader effort to ensure the financial sector remains resilient as climate-related risks become increasingly relevant to credit, investment, and insurance decisions.

Ho Hern Shin, Deputy Managing Director for Financial Supervision at MAS, said the framework is intended to help institutions develop stronger risk management capabilities while supporting the broader economy’s transition.

“These Guidelines support FIs in building their risk management capabilities in response to both physical and transition risks,” Ho said. “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.”

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