Sowing the seeds of green finance to realise Singapore's Green Plan

THE ROLE of finance in enabling a greener and more sustainable environment and society is certainly taking centrestage. Already, we're seeing the Singapore government making its green mark through establishing taxonomies, setting policies on climate-related financial disclosures, focusing on ESG data, supporting high quality carbon credit markets and catalysing green investments.

During the inaugural Singapore Sustainable Investing & Financing Conference held recently at Ecosperity Week 2021, presented by Temasek, Finance Minister Lawrence Wong reiterated these green finance initiatives. One of them is the set-up of a Green Bonds Programme Office to catalyse the government's efforts in this area.

So what are the benefits and considerations of green finance and how does this fit into Singapore's agenda?

SEEDS OF GREEN FINANCE

Spearheaded by 5 ministries, the Singapore Green Plan 2030 laid out a comprehensive strategy to advance Singapore's national agenda on sustainable development focusing on 5 key pillars: City in Nature, Energy Reset, Sustainable Living, Green Economy, and Resilient Future.

Following its release, we are already seeing developments being made under the Green Plan especially around accelerating green finance to mobilise sustainable development.

One example is the S$3 billion Multicurrency Medium Term Note (MTN) Programme and Green Bond Framework recently established by the National Environment Agency (NEA). Proceeds from the MTN programme will be used to finance its flagship waste management project, the Tuas Nexus Integrated Waste Management Facilities (IWMF), making it the first integrated facility in the region to treat incinerable waste, source-segregated food waste, dewatered sludge, and sort household recyclables with enhanced energy and land efficiency.

The benefits of the Tuas Nexus IWMF, upon completion, are not limited to treating waste and reducing its volume by 90 per cent. It will also generate enough electricity for Tuas Nexus' operations, and export excess to the national grid, which will be sufficient to power up to 300,000 units of 4-room HDB flats.

As part of the water-energy-waste nexus, the Tuas Nexus IWMF will mark the first infrastructure of its kind that is planned from the ground up to achieve multiple sustainability goals - improved energy recovery and efficiency which leads to a lower environmental footprint, including cleaner air emissions and reduced solid residues for landfilling.

The Tuas Nexus IWMF provides an example of the multiple impacts that can be unlocked with the support of green finance - in this case, the MTN programme - across the Green Plan's sustainable development pillars.

Not only will the facility contribute to the Green Plan's Sustainable Living Pillar through waste-to-landfill reduction (the Green Plan has clear targets to reduce the amount of waste-to-landfill per capita per day by 20 per cent by 2026, and 30 per cent by 2030) and the Energy Resets Pillar through reduced energy consumption, it will also add strength to the Green Economy pillar through job creation across the value chain. It is therefore worthwhile highlighting that crucial to enabling sustainable development to take place at such scale is the availability of and accessibility to green financing.

Although nascent, signs of green finance gaining momentum in Singapore are emerging as more players participate in this growing market. Recent examples include the issuance of Sembcorp's S$675 million sustainability-linked bond and the S$150 million debt platform announced by Temasek and HSBC which can also contribute to respective pillars under the Green Plan. These signal opportunities for organisations to access financing (and at times better rates) along with the growing importance to demonstrate their sustainability commitments to stakeholders and improve their long-term viability.

TRUST, CAPACITY-BUILDING AMBITION ARE KEY

For the green finance market to continue to flourish, issuers will need to continue to apply and uphold credible standards and frameworks to the issuances to engender trust.

Using the MTN Programme and Green Bond Framework again as a reference, in addition to having clearly defined the eligible green projects - placing focus on sustainable waste management related projects - the framework also aligns with the Green Bond Principles, well-established voluntary guidelines set out by the International Capital Market Association (ICMA), which serve to ensure trust and transparency in the use of proceeds as part of the project evaluation and selection process, and in the management of the proceeds and reporting.

Issuers will also need to establish robust and trusted data (eg greenhouse gas emissions) to measure performance over time, and where applicable, set ambitious targets that challenge the organisation to achieve beyond its business-as-usual. Over time, this will help increase the attractiveness of these green instruments and boost green finance market vibrancy.

As the green finance market continues to grow and deepen, in order to deliver trust, transparency and appropriate ambition, capacity will need to be built ahead of the curve. To that, it is heartening to note that upskilling platforms, such as the Singapore Green Finance Centre which is supported by the Monetary Authority of Singapore, have been established. Stakeholders in the ecosystem will need to continue to keep close tabs on building capacity within their organisations.

SUPPORTING THE GREEN PLAN

According to statistics published by the Climate Bonds Initiative, in 2020 Singapore leads in Green, Social, Sustainable (GSS) debt issuance across South-east Asia, accounting for over 50 per cent of the region's total issuance (Singapore issuance at US$5 billion). As of H1 2021, the total green debt volume in Singapore is S$19.7 billion (US$14.5 billion). The establishment of the MTN Programme will add another S$3 billion to the pool, bringing the total to S$22.7 billion, further reinforcing Singapore's leadership in the region's green bond market.

We have seen that leveraging green finance can create multi-level impact, from funding new innovative sustainability projects and developments to contributing to various environmental, social and economic pillars of the Green Plan. The Singapore government has set good examples of green finance's role in supporting the Green Plan and in delivering sustained outcomes for a shared future. The time is ripe for companies, financial institutions and other stakeholders to participate and contribute to the use of green bonds, and in growing the green finance ecosystem.

• The writers are from PwC Singapore. Fang Eu-Lin is ESG Leader and Jennifer Tay, Infrastructure Leader.