Magnitude of greenwashing is concerning, says DPM Heng

Claudia Chong
Published Wed, Jun 22, 2022 · 03:45 PM

THE rise of greenwashing is becoming the bane of global financial systems and could affect financial stability, said Deputy Prime Minister Heng Swee Keat on Wednesday (Jun 22).

Heng said there could be potential erosion of confidence in environmental, social and corporate governance (ESG) products if the greenwashing issue is not tackled well.

He noted how Morningstar recently removed ESG tags from roughly 1 in 5 funds - over 1,200 funds managing over US$1 trillion in assets.

“Regulators are putting in place legal frameworks for greenwashing to better underpin enforcement action. But this is also an area where green fintech can be put to greater use,” said Heng in a recorded speech during the opening of the Point Zero Forum in Switzerland.

The financial services forum is hosted by Elevandi, a company set up by the Monetary Authority of Singapore, and The Swiss Secretariat for International Finance.

Singapore has been deepening its involvement in ESG practices. It plans to issue sovereign green bonds to finance public infrastructure, said Heng.

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An ESG Impact Hub will be launched to strengthen collaboration within the fast-growing sustainability ecosystem. (*See Amendment note)

The hub will be a physical space in the heart of town, housing fintech startups, venture capitalists, financial institutions, non-profit organisations and family offices.

“Through this hub, we hope to also anchor key industry-driven sustainability initiatives, which includes Google’s ‘Project Point Zero’, their climate finance accelerator and KPMG’s ESG Business Foundry,” said Heng.

As ESG gains prominence, the uses of technology in sustainability will become more important, he added.

For instance, satellite imaging, Internet of Things and artificial intelligence have greatly improved the accuracy and granularity of ESG data.

With predictive modelling and analytics, more informed decisions can be made to protect the environment.

Smart contracts have also helped ensure the provenance and traceability of transactions, Heng said.

“The twin forces of digital and green will propel finance in a fundamental way in years to come. By harnessing these twin forces, we can find effective ways to reap the upsides of green financing, while mitigating risks of greenwashing,” he said.

*Amendment note: An earlier version of the article said the ESG Impact Hub will be launched next year, when in fact a launch date has not been determined. The article has been amended.

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