Accountants are the green finance advisers of the future

WHEN we talk about “finance”, there’s a shared understanding of its meaning and integral role in economic development, businesses, consumers, households, regulators, and governments. “Green finance”, which refers to anything in the finance sector related to environmental issues, activities, targets, performance, and impacts, is rightly becoming an equally important conversation.

In tying the environmental sustainability efforts of a business to financial elements – a tenet that affects any organisation’s bottom line – green finance compels the company to report its green efforts as transparently as it would with its financial transactions. The responsibility lies with the accountants and finance professionals trained in integrated reporting (IR). They play a pivotal role in identifying any irregularities by disclosing the business’s relevant financial and non-financial information, such as those on environmental, social and governance (ESG) matters.

Increasing sustainability transparency

In 2021, OCBC Bank and Eco-Business launched a climate index to raise awareness of carbon emissions produced by human activities and to encourage more environmentally sustainable behavioural change. The index showed that while the average Singaporean is highly aware of and knowledgeable about environmental issues, many are still slow to adopt green practices. According to rankings of UN member states on the Sustainable Development Report, the findings are in line with the fact that Singapore is still lagging some economies in its sustainability efforts.

But significant strides are being made to redress this. Most significantly, the Singapore government has been actively ramping up efforts to materialise the Singapore Green Plan 2030. The plan, which comes with ambitious and vital targets to achieve within 10 years, strengthens Singapore’s commitments under the UN’s 2030 sustainable development agenda and the Paris Agreement, and paves the way to achieving the country’s net-zero emission goals.

The issuance of Singapore’s inaugural sovereign green bond – known as Green Singapore Government Securities (Infrastructure), or Green SGS (Infra) – and the Energy Market Authority (EMA) green bonds are also welcomed as significant steps forward on the country’s journey towards net-zero.

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Supporting green investments

Green bonds, where money invested is earmarked for projects that address climate change and other environmental issues, are a highly effective way to finance clean energy and sustainable development projects worldwide. They can enable companies to launch projects that focus on meeting CSR objectives, supporting the Singapore Green Plan 2030, and diversifying their investor base.

For instance, proceeds from the Green SGS (Infra), which is issued under the Singapore Green Bond Framework, are used to help companies finance initiatives that are in line with the Singapore Green Plan. Separately, the EMA green bonds will focus on supporting the transition of the energy industry and ensuring stability of the electricity market. The bonds will be used to finance infrastructure and investment projects in the energy space, as well as other elements such as refinance existing borrowings.

With the availability of green bonds, more projects can be green lit, thus facilitating Singapore’s transition to a low-carbon economy and advance the UN Sustainable Development Goals.

At the centre of these initiatives are professional accountants that provide the trust and transparency stakeholders need by understanding the characteristics of green bonds and providing clear disclosures in a unified, comprehensive language. This support can help further unlock capital and build investment trust for different markets.

As a critical financial hub in the region, Singapore is well known for its robust private sector, built on a business-friendly environment. How the private sector behaves and its commitment will significantly impact Singapore’s transition to a low-carbon economy. This is why the Singapore Green Bond Framework is pivotal. It sets out the intended use of bond proceeds, the stringent selection criteria of eligible projects, the governance structure, and clearly defined reporting measures.

Accountants driving progress

In the race to achieve net-zero, finance functions will be a driving force within organisations with their expertise in measuring, accounting, reporting, and verification. Professional accountants can analyse, monitor, and report ESG-related financial and non-financial data covering costs, benefits, risks and opportunities, as well as carbon accounting and pricing fundamentals. From reporting on greenhouse gas emissions to measuring social impact, the skills, judgment and all-around, data-informed view that professional accountants have are invaluable as they will enable organisations to develop well-structured and de-risked sustainable development initiatives.

As we reimagine our business models and economies, professional accountants will be vital in creating the frameworks needed for organisations to drive real, impactful change internally and externally. By applying integrated thinking and action, they can help create long-term value for the organisation, the environment, and society.

Climate change is a global challenge, and all stakeholders in Singapore are taking firm action to play their part in meeting net-zero ambitions. In the finance industry, professional accountants are committed to contributing solutions that will help achieve climate change targets and build more socially just and environmentally sustainable economies. They will develop strategies to monitor, measure, and manage progress and help shape the financial and regulatory innovations needed to drive the behaviour changes to preserve the planet.

Daniel Leung, FCCA, is the country manager at the Association of Chartered Certified Accountants Singapore.