SINGAPORE (June 9): Green finance is critical to drive economic growth and improve social issues such as climate change, says Jacqueline Loh, the deputy managing director of the Monetary Authority of Singapore (MAS).
Citing recent data, Loh notes that green finance is already making a difference to impoverished communities.
For instance, lower-income families and small businesses were among the main beneficiaries of the US$24 billion ($33.4 billion) in social and sustainability bonds issued to support healthcare and pharmaceutical developments in 1Q20.
The amount disbursed in 1Q20 is nearly double that of the same period last year, Loh observes.
Meanwhile, she notes that since the onset of Covid-19, 24 of 26 Morningstar sustainable index funds outperformed their closest conventional counterparts. Similarly, global sustainable open-ended funds registered net inflows of US$40 billion in 1Q20 – up 40% from the year before.
To Loh, it seems the pandemic has provided “a prime opportunity for countries to build back better”.
“It is important now, more than ever that countries not only rebuild their economies and preserve jobs, but also in the process, intentionally build a more sustainable new economy,” she elaborated at the Asian Venture Philanthropy Network’s (AVPN) conference on Monday.
The World Bank’s pandemic bond facility, for one, is doing its part through US$195 million in emergency funding to 64 of the world’s poorest countries to support their recovery.
Back home, she says MAS’ green finance action plan has made “good progress” since its initiation last year.
The plan comprises three key thrusts, including building resilience to environmental risks, developing green finance solutions, and leveraging innovation and technology.
The central bank is now looking to boost its green and sustainability linked lending initiatives through a new loan grant scheme.
The move serves to defray the costs of external review and bank framework for loans with a green focus, says Loh.
“We encourage the financial sector and corporates to work in tandem with MAS’ green efforts,” she stressed.
Drawing reference to initiatives by corporates in recent months, Loh noted that there have “encouraging developments” in the recent months.
These include the National University of Singapore’s (NUS) $300 million green bond to finance projects on green buildings, renewable energy and sustainable management of water and land. The bond was formulated in partnership with the Oversea-Chinese Banking Corporation (OCBC) and DBS Bank.
In another instance, property developer CapitaLand obtained a $500 million sustainability-linked loan from the United Overseas Bank (UOB), on the basis of its efforts in green infrastructure and real estate projects.
For now, Loh is urging asset managers to “seize this opportunity,” and launch robust green and sustainability-focused strategies in anticipation of rising demand from investors once the pandemic abates.
Similarly, she points out that foundations, trusts and family offices are well placed to create positive change through their investments.
“Allocation to impact funds managed by private equity and venture capital managers will allow investors to make a positive impact, while generating market competitive financial returns,” she reiterates.
