Businesses around the world are putting a greater focus on the importance of going green. Environmental, Social, and Governance (ESG) investing has been on the rise, with ESG assets worldwide expected to exceed US$50 trillion by 2025.
For example, the European Commission (EC) presented its renewed sustainable finance strategy that defined activities to promote private investment in sustainable initiatives and projects.
In the Southeast Asian region, Singapore, as a notable investment and financial hub, has also been seizing opportunities in green financing.
The Monetary Authority of Singapore (MAS) has predicted there will be US$200 billion per year of green investments into ASEAN countries by 2030. They have decided that Singapore will be the base for this promising sector.
There will be other work that needs to be done, so let us look at what sustainable finance is, how Singapore can foster its growth in Southeast Asia, and what it is already doing to push the industry into the light.
What is Sustainable Financing, or Green Finance?
Sustainable finance mobilises financial resources to support environmentally friendly investments that combat climate change.
Climate-friendly investments can take many forms, including renewable energy, energy efficiency, and pollution prevention and control. For an investment to be considered "green", it must have a positive environmental or climate impact.
You can also see it as the implementation of environmental, social, and governance (ESG) motives into business or investment decisions to benefit both the organisation and society.
Sustainable finance is also seen as a method to pave the way for a more sustainable future with other green initiatives.
What Are the Benefits of Green Finance?
There are many benefits to investing in green projects. Not only does it help combat climate change, but it also creates jobs, boosts economic growth, and improves public health.
In fact, the United Nations (UN) estimates that the global green economy could create 24 million jobs by 2030.
Given the many benefits of green finance, it is no wonder that MAS is looking to boost its adoption in Southeast Asia. So how can Singapore help?
How Can Singapore Help Boost Green Finance Adoption in Southeast Asia?
There are a few ways in which Singapore can help boost green finance adoption in Southeast Asia. As a financial hub, Singapore has the infrastructure in place to support the growth of green finance.
It includes a well-developed banking system, a strong regulatory framework, and a large pool of experienced financial professionals.
Of note in that list is Singapore’s well-regarded regulatory framework, which in this case, has created the multi-billion dollar Green Finance Action Plan, which was launched in 2019.
The action plan provides a roadmap for developing green finance in Singapore, which aims to "support a sustainable Singapore and facilitate Asia’s transition to a low carbon economy".
Here is what that plan looks like in the real world.
Developing Markets and Solutions for a Sustainable Economy
To create green markets and help new entrants enter the sector, Singapore will dramatically simplify the process of getting loans for green projects and defray costs for any related independent reviews of sustainable-linked bonds and greens.
A US$2 billion Green Investments Programme has also been created to help build a "climate-resilient portfolio" and set the foundations for green investment capabilities in the financial sector.
Simplifying Sustainability-Related Disclosures
Nearly every country trying to build their green economy has had trouble gathering and collating environment, social, and governance (ESG) compliance data, as standards are still being developed.
To help with this problem, Singapore has started work on a common disclosure portal that will allow international investors and financial institutions to access standardised data easily. Companies can also access the portal to use it as an internal ESG monitoring tool.
This will allow for more accurate and reliable comparisons between companies, which should help drive sustainable investments.
Building Knowledge and Capabilities in Sustainable Finance
To increase the flow of sustainable investments, it is important to build up the knowledge and capabilities of financial institutions in the area.
Singapore aims to promote Asia-focused research and training on green finance with three centres of excellence across the city-state.
Educational frameworks will be built up in the form of an Institute of Banking and Finance (IBF) Sustainable Finance Technical Skills and Competencies roadmap.
MAS will also establish support services for the wider Asia-Pacific region with the GFANZ Asia-Pacific Network Central Office, in Singapore.
Harnessing Technology to Enable Sustainable Finance Flows
Finally, US$36 million has been set aside to assist fintech projects and industries, and a Global Fintech Innovation Challenge will be started to drive innovation to help financial institutions respond better to climate change.
This will include working on new sustainable finance products in a banking sector that has been somewhat reticent to serve green investment in the past.
Green Going Up
Singapore has been a leader in global investment for decades. Its famous foresight is again on display in its efforts to build a sustainable future for Southeast Asia through green finance.
Through its ambitious Green Finance Action Plan, Singapore is working to develop green markets with sustainable development goals and make it as simple as possible for companies to build green dreams.
Right now, we are on the ground floor of the green finance revolution, and if history is to be trusted, Singapore is poised to be a leader in this space for years to come.
FAQs in Sustainable Financing
- Sustainable financing is the act of implementing ESG factors in a business or in investment decisions.
- Here are some reasons why sustainable finance is important:
- Offers better returns
- A positive move for consumers, businesses, and investors
- Sustainable finance investments provides healthy returns while aligning with key values for the environment
- Singapore can drive its adoption in Southeast Asia with these measures:
- Accumulating knowledge and expertise in sustainable finance
- Creating markets and solutions for a sustainable economy