Singapore to Issue Grants to Boost Green Bond Growth

Date: 27 Mar 2017

Singapore’s central bank is to introduce a green bond grant scheme as it looks to increase the development of funds and financial products designed to advance sustainability.

According to Channel NewsAsia and other media, Second Minister for Finance Lawrence Wong said the scheme would offset 100 per cent of the cost of obtaining an external review for green bonds, up to a limit of S$100,000.

The bond has to be issued and listed in Singapore, have a minimum size of S$200 million and tenure of at least three years. The funding period will take place between 1 Jun 2017 and 31 May 2020.

“This is another significant step in a growing movement that has seen finance ministers and central bank governors become increasingly convinced that green finance should be at the center of economic development,” said Simon Zadek, Co-Director of the Inquiry into the Design of a Sustainable Financial System.

The green bond market grew by more than US$80 billion in 2016 to US$170 billion – its best year since its launch in 2007 – according to Climate Bonds Initiative (CBI). The Inquiry’s September 2016 progress report also showed that policy actions to harness the global financial system for sustainable development have more than doubled over the last five years.

The G20 has, for the first time, agreed to scale up green finance. In China, President Xi and the State Council have issued guidelines to green the financial system. And Italy, which this year holds the G7 presidency, has set out a roadmap for increasing the flows of sustainable finance.

These are just some of the encouraging moves taking place across the globe.

“Even though we are making progress, we need to step up action,” said Zadek. “Green bonds only make up less than 0.2 per cent of the global fixed income market, which is far short of the level needed to support the world’s climate and sustainability goals. This is why the actions by Singapore and others are so welcome. Ultimately, we need to green the entire US$100 trillion bond market.”

The Inquiry is partnering with the Monetary Authority of Singapore and the Singapore Institute for International Affairs to advance a “national dialogue on sustainable finance for Singapore”, aimed at helping Singapore take further steps towards shifting investment to where it needs to do.

Analysts see Singapore’s announcement as another sign of shifting global investor sentiment.

“The world as I see it is starting to change,” PwC Singapore’s Asia-Pacific Asset and Wealth Management Leader Justin Ong told Channel NewsAsia. “A lot of the investors today are much more focused around, ‘What am I putting my money in? Would I be prepared to forgo some returns to make sure that I am happy with the kind of structures and kind of policies the company is making?’”

“Green finance is a rapidly growing field, spurred on by consensus that more needs to be done to combat climate change,” Tony Lewis, Head of HSBC Securities Services, Singapore, said. “Encouraging more issuers to tap into the green bond market should help kick start interest in this asset class and foster the growth of green bonds’ issuance in Singapore.”