Singapore steps up green finance efforts

Written by Kapronasia || May 15 2023

In its competition with Hong Kong to be Asia’s top fintech hub, it is pretty clear Singapore has won. Its linkages to Southeast Asia and India – where the fintech growth story is – are superior, while Hong Kong is more narrowly focused on mainland China, where fintech peaked a while back. Singapore also weathered the pandemic better. That said, Hong Kong is emerging as a strong player in green finance, with some analysts giving it the edge over Singapore.

One area in which Hong Kong has a clear advantage over Singapore in green finance is the strength of its capital markets ecosystem. The Hong Kong Stock Exchange can serve as a platform for Chinese ESG firms and others in the green finance ecosystem to raise funds in a way the Singapore Exchange, which has consistently struggled to maintain a robust deal pipeline, cannot.

However, as of late 2022, Singapore had the edge over Hong Kong in several green metrics. According to Bloomberg, there were 272 sustainability, green, social or transition bonds listed in the city state as of the end of September 2022, more than double the 103 listed in Hong Kong. Singapore also had an edge in issuance: US$34 billion to Hong Kong’s US$24 billion. Additionally, Singaporean firms had issued US$39.5 billion in green loans at that point compared to US$13.4 billion raised by companies in Hong Kong.

Singapore’s Big 3 banks are also active players in green finance. Their sustainability reports show that DBS, OCBC and UOB have all surpassed their initial goals of sustainable loans. DBS Bank is currently the leading lender for sustainable loans, having issued S$52.7 billion since 2018 as of October 2022.  

At the same time, Singapore has unveiled some ambitious new initiatives in recent weeks and months. In late April, it and the People’s Bank of China (PBOC) announced the establishment of the China-Singapore Green Finance Taskforce (GFTF). This organization will focus on facilitating cooperation between the two countries in both in green and transition finance. Among the key aspects of the tie-up will be the establishment of an entity, the Singapore Exchange and China International Capital Corporation, that will facilitate sustainable bond market connectivity between China and Singapore, as well as a workstream that leverages technology to facilitate sustainable finance adoption, including piloting of digital green bonds with carbon credits.

The bond market initiative is intriguing as it could give Singapore a way to clear path to tap into China’s enormous and burgeoning green economy. China is among the world’s largest green finance markets, with total green loans balance and green bonds exceeding 20 trillion yuan (approximately $2.98 trillion) and 1.2 trillion yuan (approximately $179 billion), as of January 2023, according to the Agricultural Bank of China.

Further, last week, the Monetary Authority of Singapore (MAS) said that to decarbonize the economy the city-state would expand its focus from green finance to transition finance. To that end, the MAS aims to expand sustainable debt markets as well boost the quality of data and information disclosure on ESG. Sustainable bond and loan grant schemes will be widened to include transition bonds and loans, with safeguards in place to mitigate the risk of “transition-washing” and ensure alignment with internationally recognized taxonomy and transition finance principles.