The Monetary Authority of Singapore (MAS) will set aside $15 million to extend its sustainable bond and loan grant schemes for five more years till end 2028, and expand the schemes to include transition bonds and loans.
To qualify for the grants, the transition bonds and loans must be aligned with internationally recognised taxonomy and transition finance principles, and be accompanied by the disclosure of an entity-level transition plan.
To promote transparency in the sustainable debt market, MAS will incentivise the early adoption of entity-level sustainability disclosures by issuers or borrowers. The central bank and regulator will soon release more details on these changes.
MAS will also extend the Insurance-Linked Securities (ILS) Grant Scheme for three more years till end 2025 to support the continued growth of catastrophe bonds and additional climate risk financing instruments, such as sidecars and collateralised reinsurance arrangements.
Sidecars are financial structures that enable third-party investors to take on risk and returns from a specified book of insurance or reinsurance. Collateralised reinsurance are reinsurance contracts that are fully-collateralised by investors or third-party capital.
This $15 million grant — separate from the similar sum set aside for the sustainable bond and loan grant schemes — will defray the cost of issuing catastrophe bonds and the expanded suite of insurance-linked securities that focus on Asia risks.
See also: Ngee Ann Polytechnic opens a new academic school that combines 3 disciplines
MAS says extending support for ILS will enable the capital markets to raise additional financing for protection against disaster risks.
Deputy Prime Minister Lawrence Wong announced the grant on April 20 at the opening of the Sustainable and Green Finance Institute (SGFIN) of the National University of Singapore (NUS).
“These transition instruments are going to be important, and they will focus on supporting ‘brown’ companies to become green. And I think that can have a greater impact on climate transition than just issuing green bonds and loans alone,” says Wong, who is also Minister for Finance and MAS’s deputy chairman. “Transition bonds form a very small segment of the sustainable bond market. So we hope our incentives will support the growth of the transition instruments market in Singapore.”
See also: CapitaLand India Trust commissions 21MW captive solar plant in Tamil Nadu
The grants are part of an expansion to the MAS’s Green Finance Action Plan, launched in 2019.
MAS’s new plan — named the Finance for Net Zero (FiNZ) Action Plan — now includes transition finance, which refers to investment, lending, insurance and related services to progressively decarbonise areas such as power generation, buildings and transportation.
MAS will expand the scope of its sustainable bond and loan grant schemes to include transition bonds and loans, with safeguards in place to mitigate the risk of “transition-washing” and ensure alignment with internationally recognised taxonomy and transition finance principles.
MAS says it will continue to scale blended finance, in partnership with the private sector and philanthropic foundations, to mobilise financing for the decarbonisation of carbon-intensive sectors, such as phasing out coal-fired power plants.
MAS’s plans also extend to the carbon markets, which has faced scrutiny this year after verification methodologies were called into question. “We will support the development of carbon services and carbon credits markets in Singapore, to channel financing towards carbon abatement and removal projects in Asia,” says MAS.
Four strategic outcomes
The plans above form MAS’s roadmap for “green and transition solutions and markets”, one of the FiNZ’s four objectives. The other three strategies are “credible transition plans”, “climate-resilient financial sector” and “data, definitions and disclosures”.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
To support financial institutions’ (FIs) adoption of science-based transition plans, MAS will engage international partners, such as the International Energy Agency, to support the development of credible regional sectoral decarbonisation pathways.
FIs can reference these pathways when they set emissions reduction targets, and when they engage with their clients on initiatives to decarbonise their businesses, says MAS.
Consistent, comparable and reliable climate data and disclosures are needed to guide decision making, says MAS. To this end, MAS is co-creating a code of conduct with industry partners, which will require environmental, social and governance (ESG) ratings and data product providers to disclose how transition risks are factored into their products.
MAS says it will conduct a public consultation in the second half of the year to gather wider feedback.
MAS has been working with the Singapore Exchange (SGX) S68 and other government agencies to set out a roadmap for key FIs and listed companies to make disclosures aligned with the International Sustainability Standards Board (ISSB) standards “on a risk-proportionate basis”.
MAS says it will partner with relevant bodies to build up companies’ capabilities in sustainability reporting.
Launch of SGFIN
The SGFIN was first announced in September 2021 and began operations in December that year. The research institute aims to develop deep research and capabilities in the area of green finance and sustainability and provide thought leadership and shape sustainability outcomes and policymaking across the real economy and financial sectors.
At the launch, SGFIN unveiled new scholarships for students in its Master of Science in Sustainable and Green Finance programme, which took in its inaugural cohort of 44 students in August 2022. Up to four scholarships will be awarded to students in the next intake in August 2023, and more scholarships will be available in the coming years, according to NUS.
The master’s degree programme is offered in partnership with the NUS Business School. “The programme aims to train a new generation of business executives and society leaders who are deeply ingrained with sustainable finance,” says Prof Sumit Agarwal, managing director of SGFIN. “We are heartened to see the programme attracting a substantial number of local students: nine Singaporean citizens and six permanent residents… This inaugural cohort of students will graduate in July.”
SGFIN also offers executive education programmes, and the institute plans to curate a set of “lifelong learning modules and executive programmes”, says Agarwal. “For a start, we are planning to roll out modules on carbon accounting; financial valuation of social and environmental impact; sustainability reporting and governance; and sustainable project financing. This will be in addition to our existing module on social and sustainable investing that is currently offered on a yearly schedule.”
