MAS sets aside S$15 million with 5-year extension of sustainable bond and loan grant schemes

THE Monetary Authority of Singapore (MAS) is setting aside S$15 million in grants to help companies reduce the costs of issuing sustainable bonds and loans in its continued push for transition financing.

These grant schemes will now also include transition bonds and loans, and will be be extended by another five years till the end of 2028, to support more brown-to-green projects in this region.

The central bank will also top up another S$15 million to the insurance-linked securities grant scheme, which will also be extended for three more years till the end of 2025. The scheme has facilitated the issuance of 23 catastrophe bonds in Singapore thus far.

These grant scheme extensions are part of a raft of measures under MAS’ newly launched action plan, which expands the scope of its 2019 green-finance action plan, with the inclusion of transition finance. The institution has been making a big push for transition financing over the last year, in light of how non-green activities make up the bulk of the global economy, especially in South-east Asia, which still heavily relies on coal for power generation. Also, MAS is also looking at how to scale blended finance for green and transition projects, such as in the phase-out of coal power plants in this region.

Speaking at the updated action plan’s launch on Thursday (April 20), Deputy Prime Minister Lawrence Wong said transition instruments are focused on supporting “brown” companies to become “green”, and can have a greater impact on climate transition than issuing green bonds and loans alone.  

He added that transition bonds only make up a very small segment of the sustainable bond market, and the extension of these grant schemes aim to support the potential growth of the transition instruments market in Singapore.

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“We will also put in place safeguards to mitigate the risk of ‘transition-washing’ and the misuse of proceeds. To qualify for the grants, all transition instruments must be aligned with internationally recognised taxonomy and transition finance principles, and be accompanied by the disclosure of an entity-level transition plan,” said Wong, who is also finance minister.

In addition to the extension of these schemes, MAS is also looking to improve market confidence in funds that have environmental, social and governance (ESG) labels and ratings.  

The central bank and the industry is developing a code of conduct that will require ESG ratings and data product providers to disclose how transition risks are factored into their products, and it will be carrying out a public consultation in the second half of the year.

To ensure credible transition plans are being adopted by financial institutions, MAS will be engaging with international experts, such as the International Energy Agency, to support the development of regional sectoral decarbonisation pathways appropriate for Asia’s context.

It will also review how financial institutions are responding to the climate change risks by incorporating evolving international best practices in its supervisory approach.

Given the lack of sustainable finance professionals due to the nascency of this market, MAS will be partnering the Institute of Banking and Finance Singapore to develop the jobs transformation map for sustainable finance, which aims to deepen its understanding of how the climate transition will shape future job trends, and guide new initiatives to reskill and upskill Singapore’s existing workforce.

The National University of Singapore also launched the Sustainable and Green Finance Institute, which began operations in Dec 2021, on Thursday.