December 18, 2023
Japanese Bankers Association
JBA comments on the Consultation Paper on Guidelines on Transition Planning (Banks) by the Monetary Authority of Singapore (MAS)
Questions

Comments

MAS’ Supervisory Approach to Transition Planning for Banks
Q1: MAS seeks comments on the proposed
definition of transition planning.

・The proposed Guidelines on Transition Planning (“TPG”) define transition planning as "the internal strategicplanning and risk management processes undertaken to prepare for both risks and potential changes in businessmodels associated with the transition", however, we believe that transition planning is a strategic exercise todefine strategies and actions to achieve the voluntary net zero targets of financial institutions or real economy
firms. Thus, the frameworks for transition planning and climate-related risk management should be consideredseparately.

・ Of course, the risk management department of a bank may be involved in understanding the governance andsupervision of transition planning as well as the impact of risk on the business strategy, but transition planningshould not be seen as a summary of the financial institutions’ climate-related risk management.
・ In this definition, we are concerned about the risk of conflating a bank's transition planning with the approach tomanaging climate-related financial risks.
Q2: MAS seeks comments on the proposed

・ Based on the proposed definition of transition planning, there may be a gap between what MAS expects in acontext for the TPG as laid out in paragraph 1.3

bank’s transition planning and a bank’s actual transition planning efforts that banks have ‘proactively’ taken toof the TPG.

achieve their net zero target that was ‘proactively’ committed to by banks.
・ Transition planning is a strategic exercise to support a complete economic transition to net zero. In the case of alarge banking institution, transition planning is a joint endeavour undertaken together with clients to assess how
to best deploy private and public capital to achieve decarbonisation of hard to abate sectors in the economy.
Transition planning is a multiple stakeholder exercise, where financial institutions are ‘enablers’ not ‘drivers’.
・ Climate risk management and scenario analysis are helpful for understanding which sectors may be exposed toheightened climate risk (either physical or transition risk), but there are limitations with respect to the ability forrisk management to guide transition planning. At the same time, transition planning is not prudent risk
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management either. Thus, regulators need to distinguish between transition planning and risk management.
Transition planning rather looks at the longer term (strategic / business planning), whereas the current risk
management frameworks and philosophy is rather short term focused, e.g. loan book 3-5 years horizon, capital /ICAAP 3 years, etc.

Q3: MAS seeks comments on whether the・ The importance for banks to factor in the climate-nature nexus is unquestionable. Given, however, that thedrafting of paragraph 1.3(d) of the TPG ontransition is currently at the initial stage of approach development, we consider that incorporating otherfactoring in the climate-nature nexus accords
Banks with sufficient flexibility to improve theirunderstanding of other environmental-relatedrisks and risk management processes over time.
What are some tangible areas regarding otherenvironmental related risks into climate related transition plans would be premature.
・ In this regard, the MAS should not have excessive expectations that transition plans can simultaneously solve
other environmental issues.
The purpose of transition planning is ultimately to achieve net zero in the real economy, and it should bepositioned to ensure that activities for this purpose do not bring significant negative impacts to other aspects ofthe environment.

environmental related risks (e.g. vulnerabilityon water availability) that you would see value
in having elaboration in the guidance?
Applicability of the TPG
Q4: MAS seeks comments on the entities and・ It is reasonable to lay out that “banks that are branches or subsidiaries of global groups may take guidance frombusiness activities that are in the proposed scope

their Group’s transition planning as long as the Group’s transition planning approach meet the expectations setof the TPG.

out in the TPG.” However, due to a difference in the location of a head office, in some cases, it may be difficult
to meet all the expectations and requests set out in the TPG. Therefore, consideration should be given to allow
flexibility in alignment with guidance, etc. established by a jurisdiction in which the head office is located forbranches of global groups.
・ Transition plans of financial institutions are typically developed at a global and group-level to define the groupwide strategies to achieve the group-wide decarbonisation target.
Therefore, any framework developed for transition plans should be standardised at a global level to fit a groupwide transition planning.
If each jurisdiction (in addition to MAS) develops different frameworks for transition plans, this may hinder the2Questions

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ability of financial institutions to achieve the original objective of transition planning—realising net-zero.
MAS may wish to further collaborate globally with jurisdictions to avoid fragmentation and develop a globallystandardised supervisory approach for transition plans.

Proposed TPG
Governance and Strategy
Q5: MAS seeks comments on the proposed

・ The commitment of the board of directors and senior management of banks to address climate-related risks isexpectations on governance and strategy as laid

essential. In delivering this commitment, TPG’s expectation to avoid indiscriminately divesting or withdrawing
financing by banks in the first instance and prevent any disorderly transition should be upheld. This needs to beout in paragraphs 2.1 to 2.3 of the TPG.

taken into account, in particular, in setting risk appetites.
・MAS may also wish to ensure that this framework will not hinder capital mobilisation for developing countries
and emerging markets, who are the most vulnerable to the impact of global warming and therefore requiretransition finance the most.

Risk Management
Q6: MAS seeks comments on the proposed

・ It is reasonable to set out the expectations for banks to engage and steer customers, particularly those identified

expectations on customer engagement as laid

as vulnerable to transition and/or physical risks. In meeting these expectations, it is essential to avoid a disorderlyout in paragraphs 3.1 to 3.5 of the TPG.

transition and indiscriminately divesting or withdrawing financing by banks.
・ Collecting climate-related data from customers will be the basis of risk assessment. Since, in many cases, data
disclosure by many customers is still a work in progress, the proposed expectations should take into account thefact that, in practice, data collection by banks cannot be completed at this stage.
・MAS may also wish to ensure that this framework will not hinder capital mobilisation for developing countries
and emerging markets, who are the most vulnerable to the impact of global warming and therefore requiretransition finance the most.

Q7: MAS seeks comments on the proposed
expectations on the approach to portfolio
management as laid out in paragraphs 3.6 and3.7 of the TPG.

・ Considering the current business environment, the portfolio management based on engagement described in theproposed TPG seems to overestimate the role of banks.
While the role of finance is important, there are various external factors (especially government policies,
technological development, consumer preferences, etc.) on the path to net zero in the real economy, and it should
not be positioned as if all problems can be solved by a bank’s engagement and responses in the portfolio.
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Q9: MAS seeks comments on the proposals set

・ We understand the importance of setting targets that are sufficiently ambitious. These expectations, however,out in paragraphs 3.10 to 3.12 of the TPG,

should take into account scenarios such as an orderly transition being prevented, or indiscriminately divesting or

particularly in relation to the expectations

withdrawing financing by banks.

around setting of decarbonisation targets by・ MAS may also wish to ensure that this framework will not hinder capital mobilisation for developing countries
and emerging markets, who are the most vulnerable to the impact of global warming and therefore require

Banks.

transition finance the most.

Disclosure
Q15: MAS seeks views on whether paragraphs

・ The importance of stakeholder engagement is unquestionable. Responding to climate-related risks is a challenge

4.1 and 4.2 of the TPG set out the key aspects

common to all stakeholders, which cannot be addressed by banks alone, and therefore requires joint initiatives.

necessary for market transparency.

The views of stakeholders may differ in certain aspects of joint initiatives due to differences in their stance.
Mandating disclosure of engagement strategies that encompass all stakeholders to address such differences is notconsidered to be appropriate in light of the underlying purpose of this disclosure. Therefore, this disclosure shouldbe optional.

Implementation Approach
Q20: MAS seeks comments on the proposed
implementation

approach,including

proposed transition period of 12 months.

the・ For the moment, the MAS and other regulators may need to wait for the finalisation of the TPG until banks havestarted publishing their transition plans. This transparency may bring a more accurate understanding of the rolesand challenges of the actual transition plans. This insight may lead to a different view on the framework fortransition planning or prudential framework/treatment needed to actually support the transition.
・ Even if the proposed guidelines will be applied 12 months after the transition period, it will not be easy to meet
all expectations set out in the TPG. We therefore request MAS to consider a phase-in implementation approachallowing banks to first apply those that are feasible for them.
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