Singapore will invest US$2 billion in ‘green’ finance to mitigate and adapt to climate change risks – here’s what that means

Of the total amount, US$100 million will be allocated to the Bank for International Settlement’s Green Bond Fund, in hopes of catalysing further deepening of the growing green bond market, the Monetary Authority of Singapore said.
The Business Times

Going green is not easy, and it seems, also requires a huge amount of green of a different sort.

In a move to promote environmentally sustainable projects and to mitigate climate change risks in Singapore and the region, the Monetary Authority of Singapore (MAS) said on Monday (Nov 11) that it will invest US$2 billion (S$2.7 billion) into public market investment strategies with a strong green focus.

The green investments programme (GIP) – announced by MAS board member Ong Ye Kung at the fourth annual Singapore FinTech Festival (SFF) on the same day – is part of a slew of new initiatives to make Singapore a leading centre for green finance and to make the financial system here resilient to environmental risks, MAS said.

Green finance refers to financial services that deliver both returns and environmentally positive outcomes, including dealing with climate change.

According to a 2016 study by the London School of Economics and Political Science, natural disasters over the last 30 years cost the world an annual average of US$140 billion. And in the last decade, seven out of 10 years exceeded this average.

As temperatures rise, US$1.7 trillion of global financial assets or about 2 per cent of today’s global GDP are estimated to be at risk, the report said.

Where the US$2 billion is going

Out of the total US$2 billion, MAS will allocate US$100 million to the Bank for International Settlement’s Green Bond Fund to catalyse further deepening of the growing green bond market.

In order to make finance greener in Singapore, green lending has to become a mainstream activity, said Ong, who is also Education Minister.

According to him, MAS will also develop incentives to encourage growth in green and sustainability-linked loans. The regulator will also develop grant schemes to help defray costs for businesses’ sustainability frameworks and engaging external reviewers, Ong added.

In addition, the new Environmental Risk Management (ENRM) will provide guidelines across the banking, insurance and asset mangement sectors.

Ong said the guidelines will set standards on governance, risk management and disclosure in order to encourage the right-pricing of loans and investments, and the promotion of new opportunities for green investment.

MAS will publish a consultation paper regarding this in the first quarter of 2020.

Additionally, it will also support the setup of organisations that contribute to Asia-focused climate research which can be applied in the financial sector, Ong added.

These organisations will support the development of innovative green finance solutions, deepen our understanding of climate risks, and enhance climate risk management in Singapore.

“This is just the tip of the iceberg,” Ong said, as “many more ideas and applications will emerge” from next year’s SFF FinTech Hackelerator, which will have green finance as its key horizontal theme.

Ong said that finance, innovation and technology are forces of good to overcome challenges and improve lives.

“Climate change is the ultimate challenge for humankind. It cannot be that the two objectives of being green and pursuing growth are irreconcilable,” he said.

“Part of this solution is to make finance green because finance mobilises the resources of the world,” he added.

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