03 Aug SIIA Briefing Session: Powering Singapore’s Green Economy through Green Finance
As a leading financial hub, Singapore is witnessing a growing interest in Green Finance amid a broader transition towards a sustainable, green economy. Various stakeholders such as the Monetary Authority of Singapore (MAS), the Association of Banks in Singapore (ABS) and the Singapore Exchange have made important steps to promote sustainability. How have these efforts benefited Singapore’s shift to a green economy and where does Singapore stand in relation to global developments on Green Finance?
We held a briefing session on Tuesday 17 July led by Ms. Yeo Lian Sim, Special Adviser Diversity, Singapore Exchange (SGX), Vice-Chair, Task Force on Climate-related Financial Disclosures (TCFD) and Associate Professor Simon Tay, Chairman, Singapore Institute of International Affairs. Both speakers are co-Chairs of the Collaborative Initiative for Green Finance in Singapore. Here’s a look at what came up during the discussion.
The conditions to establish a green economy and a green finance market in Singapore are on the rise. The Singapore government has signalled the intention to shift national attitudes, perspectives and business behaviour towards combating climate change and facilitate the transition towards a more sustainable economy. The country is also turning its risks into strengths and opportunities through efforts such as Smart Cities. However, unlike European countries, the region continues to contend with the financing of coal-fired power plants as some stakeholders wish to capture the economic opportunity.
Investors, asset owners and asset managers must play a bigger role to advance green financing. Europe, like Singapore and Asia, has experienced similar challenges, such as the lack of investors who have defined their portfolios as sustainable and green. However, there is cause for optimism among the SGX-listed companies which are producing sustainability reports from this year. To some extent, companies have seen new investors, although it is not widespread. These new investors are likely to be sustainable or responsible investors. Sustainability could be incorporated as part of their investment activities and feature in the interactions between investors and companies. Moving forward, we need to examine how these efforts could be measured so that we truly achieve the greening of companies.
There is a need to continue capacity building to support the green economy. In June, the Monetary Authority of Singapore (MAS) and the International Finance Corporation (IFC) signed a Memorandum of Understanding (MOU) to encourage green bond issuances by financial institutions in Asia . The MOU involves capacity building and will be useful. At the same time, information gaps could be met through the establishment of a local Environmental, Social and Governance (ESG) research and ratings company and/or universities to provide second opinions regarding green bonds. However, the Singapore market is too small; in order to thrive, these institutions will have to establish their reputation and serve the region.
Beyond financial institutions, individual companies need to be conscious of their whole supply chain and the market demands for sustainability. Companies in Singapore may respond defensively towards external pressure to be sustainable, and it is equally important to recognise that some of these demands may be beyond their control. A case in point is the European Union’s position on palm oil and there is a danger that certain parameters regarding what constitutes sustainable vegetable oils could be established without the inputs of producing countries in ASEAN. The EU’s position will carry implications even for larger and less sophisticated markets and it is important for ASEAN to recognise the possible disruption to the supply chain.