Sustainability in Singapore’s financial sector: asset management and ESG compliance

Despite the relatively small size of her stock markets, Singapore is a major fund management centre which Bruner has described as a ‘market-dominant small jurisdiction’.While a large proportion of its funds under management exist in the wealth management space with discretionary and non-discretionary private banking services, there are also many collective investment schemes that have been set up in Singapore operating within an Association of Southeast Asian Nations (ASEAN) framework. Further, in the past 20 years or so, Singapore has grown to become one of the largest real estate investment trust markets in Asia. Both ASEAN and the real estate investment trust market have provided Environmental, Social, and Governance (ESG) guidance as have the standards of the Task Force on Climate-Related Financial Disclosures.The Singapore Government is also quite clear with respect to the importance of investor stewardship and sustainability and through its own state investment agencies has led the way in both ESG practices as well as its involvement in the formation of stewardship guidelines. This was driven in part by the Kay Review’s philosophy against short-termism on the part of asset managers. Given the size of these sovereign funds, the market forces generated by their outsourcing have no doubt influenced external fund managers to adopt their ESG philosophy which is for their investment portfolio to achieve net-zero by 2050. How that philosophy translates into real action on the part of its external managers as well as its investee companies will be the challenge given the different cultural and economic circumstances in the region and how different investors view ESG.This article will examine the disclosure and other regulatory obligations of asset managers and trustees of collective investment schemes in Singapore in the context of ESG. While much of this takes the form of softer law such as listing rules, codes, and guidelines, critical appraisal will be made of how this can be backed by the application of weightier sanctions, particularly with respect to the innovative use of private law. The law of investment fiduciaries in terms of how they manage contradictions that can arise in the ESG space between duties to their own investors, their principal beneficiaries and the public will have to be resolved given that outside of Europe litigation has not been as successful in driving real change.