Singapore may expand green financing incentives for financial services companies to boost their resilience against the economic impact of climate change.
That’s according to Monetary Authority of Singapore Managing Director, Ravi Menon, who says the central bank sees opportunity to expand its sustainable grant program beyond bonds. Financial institutions need to prepare for potential changes in asset values and policy caused by climate change, and be able to seize new business opportunities, he said.
Other areas that can be promoted include green funds, loans, insurance and risk-transfer solutions, according to Menon.
“The economy of the future has to be greener, which means the financial sector has to be greener than before and be in a position to support that kind of activity,” Menon said in an interview in Singapore. “If you look at the full range of financial services then the challenge is to ask ourselves: have we applied our minds to make each of these services and offerings conducive to creating a more green economy that has lower carbon footprint?”
Southeast Asian nations are some of the most vulnerable to climate change and are estimated to need $200 billion in green investments each year to 2030. Singapore issuers have so far sold about S$6 billion ($4.4 billion) worth of green bonds, a small portion of Singapore’s S$96 billion corporate bond market, MAS data showed.
The MAS rolled out its green bond grant program three years ago to help companies fund up to S$100,000 in expenses related to obtaining a review for green bond sales. Borrowers must sell bonds that are at a minimum S$200 million in size, or have a bond program of that amount with an initial issuance of at least S$20 million.
The central bank expanded this in February to include securities that target social works and sustainability.
“For the last two to three years, we’ve had the green bond scheme which we’ve expanded considerably, and we are now thinking about this in other areas of finance,” Menon said.
An important step in developing the local green finance industry is to tackle company disclosure on sustainability issues, according to Menon. While publicly listed companies are given guidelines on sustainability reporting, “the quality of the disclosure quite frankly varies widely,” he said.
Local financial services players, including the nation’s biggest banks, appear to be taking heed to the growing interest in green finance. Oversea-Chinese Banking Corp. wants to build a sustainable finance portfolio of S$10 billion by 2022, while United Overseas Bank said it would halt funding for new coal-fired power plants. Southeast Asia’s biggest lender, DBS Bank Ltd., has been extending sustainability-linked loans to borrowers such as CapitaLand.
“If climate change is indeed the existential challenge facing mankind, the strategies that we embark on mitigating and managing that process will have huge impact on economies,” Menon said. “I think greening the financial system will be as important as the technological transformation of the financial sector.”