Singapore is contemplating the idea of expanding green financing incentives for financial services companies to help boost their resilience against the economic impacts of climate change. Ravi Menon, managing director at Monetary Authority of Singapore (MAS) said the central bank sees an opportunity to expand its sustainable grant programme beyond bonds.
Climate change will eventually cause a change in asset value throughout the world. Thus, financial institutions must be ready to adapt and act on new business opportunities that arise from said change.
The economy of the future has to be greener, which means the financial sector has to be greener than before and be in a position to support that kind of activity,” Mr Menon said in an interview in Singapore. “If you look at the full range of financial services then the challenge is to ask ourselves: have we applied our minds to make each of these services and offerings conducive to creating a more green economy that has lower carbon footprint?”
Countries in Southeast Asia are some of the most vulnerable . They are estimated to require US$200 billion in green investments each year to 2030. Singapore issuers have so far sold about $6 billion worth of green bonds, a small portion of Singapore’s $96 billion corporate bond market, MAS data showed.
The MAS green bond programme was implemented three years ago in an effort to help companies fund up to $100,000 in expenses related to obtaining review for green bond sales. Borrowers must sell bonds that are at a minimum $200 million in size, or have a bond program of that amount with an initial issuance of at least $20 million.
According to Mr Menon, one of the important steps in developing the local green finance industry is to address disclosure on sustainability issues. Despite being provided guidelines on sustainability reporting, the quality of disclosure varies wildly from company to company.
“If climate change is indeed the existential challenge facing mankind, the strategies that we embark on mitigating and managing that process will have huge impact on economies,” Mr Menon said. “I think greening the financial system will be as important as the technological transformation of the financial sector.”