New grant to boost green bond issuance in Singapore

Singapore

SINGAPORE is keen to develop a green bond market that is globally valued at about US$200 billion, and the Monetary Authority of Singapore (MAS) will offer a grant to bond issuers to cover expenses, said a top minister on Thursday.

Bond issuers who qualify can offset all expenses from obtaining an external review of green bonds, up to a cap of S$100,000 per issuance, said Lawrence Wong, second minister for finance and minister for national development, at the IMAS conference.

"MAS recognises that green bond issuers may have to bear additional costs as they engage external reviewers to ascertain their green bond status," said Mr Wong.

This comes as Singapore looks to introduce new benchmarks across different asset classes amid signs that sustainable investing can pay off. Investors are allocating more capital to sustainable businesses, and Singapore's investment giants Temasek Holdings and GIC are also taking sustainability into consideration when evaluating investments, he added.

Green bonds are used to fund projects that have a positive impact on the environment. The green bond market has grown rapidly over the years, with Bank of America Merrill Lynch (BOAML) estimating a need of about US$90 trillion of investments into low-carbon infrastructure through to 2030, in order to hit global growth expectations. Of this, 60 per cent of such investments will be needed in the emerging markets. China alone will require about US$450 billion in investments.

BOAML, the top issuer of green bonds globally and in Asia, noted that 2016 showed off the fourth straight record year of green bond issuances, with about US$90 billion in green bonds issued last year. It is projecting as much as US$130 billion of issuances in 2017, led mainly by China.

Singapore has a broad community of asset managers and institutional investors on the buy side, and banks with strong debt origination capabilities on the sell side, said Mr Wong.

"This puts us in a strong position to support the development of a green bond market. The presence of such a market here will add to the breadth and depth of our debt market," he added.

Peter Guenthardt, country executive for Singapore and South East Asia at BOAML, said this "forward-looking" policy will enhance Singapore's position at the centre of Asia's growing market for socially responsible financing. "The Asia green bond market is a driver of incremental global growth. This move positions Singapore as a key player in what is rapidly becoming a mainstream avenue for financing."

Tony Lewis, head of HSBC's securities services in Singapore, said green bonds offer diversification for investors, and an opportunity to promote sustainability. "Green finance is a rapidly-growing field, spurred on by consensus that more needs to be done to combat climate change. Encouraging more issuers to tap into the green bond market should help kick-start interest in this asset class and foster the growth of green bond issuance in Singapore."

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