A STUDY OF SINGAPORE'S PROGRESS TOWARDS ESTABLISHING A GREEN FINANCE MARKET

Abstract

Singapore has established itself as an Asian financial hub and is currently extending its efforts in establishing itself as a significant player in green and sustainable finance, of which the issuance of green bonds makes up the largest component. Singapore has had an encouraging start in green bond issuance since the MAS first stoked the market by launching a Green Bond Grant (GBG), and the MAS has demonstrated its agility in recognizing and responding to the broader sustainable bond trend by enlarging the grant scheme to include social bonds and renaming the programme as Sustainable Bond Grant (SBG). However, Singapore’s role in this key area of bond issuance as part of sustainable finance is many shades off its reputation as a financial hub. As climate issues gain significance in the finance world, the quantum of green investments required continues to increase and investors are beginning to demand that their funds are invested responsibly, there is no doubt that there is huge potential for Singapore to stake a significant role in this relatively new sustainable finance market. The Singapore Institute of International Affairs (SIIA), through a series of engagement with 65 financial institutions that provide banking and insurance services, and institutional investors as part of its report on Collaborative Initiative for Green Finance in Singapore has initiated a record of where these organisations are on a spectrum of Green Finance involvement in terms of understanding and implementation. Though the results of the analysis can be read as being encouraging as more than one third of the organisations involved are proactively evolving their business to embrace Green Finance, the majority of the companies are only still in the Exploratory or Preliminary stages. As such, Singapore still has some distance to go before it can establish itself as being at the forefront of the drive towards Green Finance. Aside from financial policies that directly incentivise issuances of green debt such as the GBG and SBG by the MAS, there needs to be more fundamental developments in the economy, governance and overall participation of society to manifest real growth of the green bond market and drive the greater adoption of green finance. The OECD publication Mobilising Bond Markets for a Low-Carbon Transition1 (the “OECD Publication”), highlighted some preconditions and policy considerations to stimulate the market for green bonds in financing green infrastructure. Within the context of global developments in the green bond and green finance markets, this study contrasts Singapore’s current position in terms of the development of its green bonds market against these preconditions and policy considerations and concludes with suggestions for further studies in this rapidly developing area where the global finance system seeks to evolve to direct capital to respond to the demands of climate change mitigation and sustainability objectives.