Creating a Climate-Resilient Investment Portfolio
Ongoing
To improve the resilience of our investment portfolio to climate-related risks and capture investment opportunities from a potential global transition to a low-carbon economy, MAS utilises the 3 ‘A’s framework, as outlined in MAS Sustainability Report 2020/2021:
Analysis: We continue to build our capabilities to measure the impact of physical and transition risks arising from climate change on MAS’ portfolio. In 2020, we performed a scenario analysis on the portfolio for various transition pathways, to better understand the potential climate-related shocks that could manifest over both the short and long terms, and their impact on the investment portfolio.
Actions: We have developed climate risk mitigation strategies that provide the flexibility to reduce exposures to companies or sectors assessed to be vulnerable to high transition risk scenarios. To integrate sustainability into the investment process, our external managers are expected to consider material Environmental, Social and Governance (ESG) risks when investing in companies to generate good long-term sustainable returns.
We also support the greening of the economy through our investment activities in the following ways:
- Catalyse the development of green investment solutions and expertise to enable the mobilisation of capital in support of the transition to a green economy. In June 2021, MAS announced the award of investment mandates totalling US$1.8 billion under the Green Investment Programme to five external fund managers, on top of a US$100 million existing investment in the green bonds investment pool managed by the Bank for International Settlements (BIS).
- Improve industry adaptation through active stewardship by our external managers. Through shareholder engagement and the exercising of voting rights, we seek to encourage change in portfolio companies by increasing their awareness of climate risk and opportunities and supporting efforts to transition towards long-term sustainability.
Accountability: We are monitoring the climate risk exposure of MAS’ reserves portfolio and will continue to report on suitable carbon and climate metrics in the Sustainability Report. These metrics provide a gauge of the level of our portfolio’s climate risk exposure and quantify the impact of our actions on the portfolio’s emissions profile over time.