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    MAS Announces NovA! Utility for ESG Risk Assessment in Lending

    June 21, 2022

    The Monetary Authority of Singapore (MAS), the Banque de France (BdF), and the Autorité de contrôle prudentiel et de résolution (ACPR) conducted a joint exercise to strengthen cross-border cyber crisis response and preparedness. The joint exercise tested the effectiveness of cyber crisis coordination and response when managing scenarios such as ransomware, zero-day vulnerabilities, and information technology supply chain attacks. The exercise focused on cybersecurity threats and highlighted the importance of cross-border cooperation to safeguard the financial stability and the resilience of essential financial services. MAS also announced the first use case of the NovA! consortium, which will help financial institutions in the Environmental, Social, and Governance (ESG) risk assessment for originating, underwriting, and servicing of sustainability-linked loans.

    NovA!, which is a part of the National Artificial Intelligence Program in Finance, aims to help financial institutions harness artificial intelligence to generate insights and assess the sustainability performance of the real estate sector in Singapore. Financial institutions will use NovA! for their ESG risk assessment for:

    • loan origination, to identify real estate corporate borrowers whose sustainability metrics can be improved, by comparing their historical environmental performance to that of their peers.
    • underwriting, by assisting financial institutions to set appropriate sustainability performance targets (SPTs) for the borrowers, by comparing borrowers’ targets with the SPT Industry Benchmark generated by NovA!
    • servicing of loans, by comparing the actual sustainability performance indicators (through direct use of meters or sensors) against the borrower’s self-declaration to detect greenwashing.

    The NovA! ESG use case will also reduce the amount of time it takes for financial institutions to collect, process, and analyze data through the use of natural language processing technique to automatically extract relevant information from documents. This will reduce the overall cost of operations for financial institutions. To support the sustainability journeys of financial institutions, NovA!’s ESG use case will be integrated with the MAS’ Project Greenprint, which is a collection of digital data utilities and initiatives aimed at harnessing technology and data to aggregate high-quality, consistent, and granular sustainability data, to enable a transparent, trusted, and efficient ESG ecosystem. Datasets collected via Greenprint will be used to supplement NovA!’s insights-generation capabilities, which will be accessible to Greenprint partners via application programming interfaces (APIs). A demo version of NovA!’s ESG use case will be released during the Singapore FinTech Festival 2022 in November. In early 2023, a beta version will be released for testing by financial institutions, followed by further fine-tuning for eventual industry adoption of the solution. Moreover, a white paper documenting the product design and artificial intelligence features will be published in mid-2023. So far, the NovA! consortium has 16 members, including banking institutions like Citi Singapore, HSBC Singapore, Standard Chartered Bank (Singapore) Limited, MUFG Bank, Ltd, Temasek, DBS Bank Ltd, and Bank of China Limited.

     

    Keywords: Asia Pacific, Singapore, Banking, Cyber Risk, Artificial Intelligence, ESG, Loan Origination, Underwriting Risk, Credit Risk, Greenwashing, NLP, Project Greenprint, API, Regtech, Operational Risk, ACPR, BDF, MAS

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