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Seeing Green

dollar-1702286_1280

05 Dec Seeing Green

by Simon Tay, Cheryl Tan and Lau Xinyi

There is growing interest for the “red dot” to become a green finance superstar. What might speed this transition?

Singapore is a leading financial hub, fast to adapt to new trends and regulations. Its financial sector has been progressive, seizing opportunities and taking responsibility in the wake of the Global Financial Crisis. Green finance, an emerging trend in the global financial community, links to sustainability and climate change concerns. Singapore, with its strong record in environmental management as well as financial strengths, needs to consider taking a step forward in this direction.

Finance and investments can be used to generate benefits, contribute towards sustainable development, and to avoid environmental damage. Environmental, social, and governance (ESG) considerations have increasingly become part of the fiduciary duty expected of financial institutions worldwide.  Locally, awareness of ESG is growing and gaining momentum.  Companies – and their financiers – may be held responsible for haze-causing activities under the Transboundary Haze Pollution Act. The Association of Banks in Singapore (ABS) has issued Guidelines on Responsible Financing, requiring banks to incorporate ESG criteria in lending and client risks assessments. The Singapore Exchange has mandated its listed companies to conduct sustainability reporting on a “comply or explain” basis from financial years ending on or after Dec 31, 2017.

Green finance is a further step attuned to ESG initiatives like these. Its proponents believe companies that are more transparent can attract a wider range and higher calibre of investors who want investments with the potential to generate better financial returns in the long run.

Much of the impetus for green finance comes from climate change concerns. On the back of the 2015 Paris Agreement, there is a push for low-carbon economies—something green finance can help support. Regionally, the need for sustainable development and infrastructure improvements can also be linked to green finance.

Singapore, as the 2018 ASEAN Chair, has huge opportunities to lead through green finance. This will not only shape the region’s prosperity but also secure future generations’ survivability. Going forward, government leadership will be pivotal to set a clear direction and introduce the right incentives.

Against this backdrop, the SIIA has come to analyse and make the case for green finance with a Collaborative Initiative for Green Finance in Singapore, working in partnership with the UN Environment Inquiry, the Monetary Authority of Singapore, and ABS.

The Collaborative Initiative aims to position Singapore as a leading green finance hub. As part of the Initiative, the SIIA will produce a report due end 2017. It has four specific objectives concerning green finance:

  1. Establish a baseline for the current level of understanding and implementation;
  2. Outline the opportunities crucial for moving forward;
  3. Develop a shared vision among the financial players in Singapore; and
  4. Gather and consolidate specific recommendations on how to move the overall sustainable
    finance agenda forward in Singapore.

 

Working group meetings involving more than 150 financial stakeholders and nearly 70 closed-door consultations were held. These converged representatives from across the banking, asset management and insurance sectors, socialised green finance, and encouraged greater awareness about the opportunities in the region.

While there is considerable variation in how different financial institutions and corporations see green finance, Singapore’s strength as a financial hub assists her in seizing a fair share of responsibilities and opportunities that may arise in the future.

About the authors
Simon Tay is chairman of the Singapore Institute of International Affairs (SIIA) and associate professor of international law at the National University of Singapore. Cheryl Tan is deputy director (ASEAN), and Lau Xin Yi, senior policy research analyst (Sustainability) of SIIA. The preceding article was previously featured in Issue 13 of ENVISION Magazine, a publication of Singapore’s National Environment Agency.