Singapore must continue cross-sector green push in 2023

TWO months into 2023, it’s apparent that nations are staying committed to their long-term green ambitions despite some short-term headwinds, with Asia set to play a pivotal role in making or breaking our planet’s race towards net zero.

Both the regulatory and business push to decarbonise industries is in full swing: every sector has now embarked on the ESG journey with unique challenges and opportunities – from fashion, real estate, and hospitality to transport, logistics, and supply chains.

Governments like Singapore and elsewhere are increasingly introducing carbon pricing, carbon taxes, and other green policies to encourage businesses to reduce their carbon emissions.

This pressure is making it more expensive for emitters, driving businesses to look for ways to reduce their carbon footprint while at the same time investing in environmental, social and governance (ESG) and carbon-tracking technologies.

Besides governments, private-sector companies are starting to step up in a big way by incorporating sustainability in their businesses to maintain competitiveness and ensure resilience in today’s climate.

Pressure on every sector to go green

Businesses that are better prepared for climate change are more likely to remain profitable over the long term, making them more competitive and improving their reputation with stakeholders and consumers.

A notable example of an industry decarbonising has been highlighted by the steady growth in demand for sustainable fashion, with 66 per cent of consumers considering sustainability when purchasing clothes, according to findings by McKinsey.

As we look to the year ahead, there is a need for Singapore’s fashion and textile industry to take more action on sustainability in its end-to-end supply chain.

Fashion will remain a keystone sector in transforming the Asean supply chain to one that is more sustainable and competitive, helping maintain its role as a leader globally.

Real estate is another sector which will see rapid sustainable development this year with green financing for real estate becoming mainstream, and companies facing reduced funding opportunities if they do not go green.

Beyond a potential premium in financing costs, a recent OCBC report also noted that green buildings command a premium among buyers and tenants.

On the regulatory front, listed real estate companies are already required to release sustainability reports that include disclosures on material ESG factors, policies, practices, performance, and targets.

The goal is for corporates in Singapore’s real estate sector to be able to better quantify and verify their buildings’ emissions, and evidence their sustainability efforts.

In turn, Singapore’s banks will be able to streamline their risk management process and make better data-driven decisions when financing real estate projects.

In hospitality, the emergence of the conscious traveller has led hotels to begin to understand that what’s good for society may also be good for business, with many of the largest multinational hotel companies making pledges to invest in sustainability initiatives.

Locally, the Singapore Hotel Association and the Singapore Tourism Board jointly launched the Hotel Sustainability Roadmap in March 2022, outlining key targets that the hospitality sector has to reach starting 2023 in terms of sustainability certifications, emission tracking, and decarbonisation.

Even so, hotels face challenges in going green and tracking, measuring, and quantifying their green efforts, which is so important in attaining ESG financing – and only becoming more so.

Transport, too, is a sector we have big hopes for this year when it comes to going from brown to green.

Two years ago, the Singapore government launched the Singapore Green Plan 2030, a movement that aims to advance sustainable developments nationwide for the next decade.

This will mean the transportation sector needs to make drastic cuts to its current greenhouse gas emission levels, with road transport currently making up 97 per cent of the city-state’s transport carbon footprint.

However, in spite of the enforcement of regulations and companies’ best efforts at decarbonisation, residual carbon emissions remain inevitable for some businesses.

This is why carbon credits will remain an important tool this year, offering businesses the opportunity to offset their residual emissions while they continue taking steps towards net zero.

A few challenges currently affect the adoption and effectiveness of carbon credits in contributing to real positive climate change, with greater data transparency and traceability still required in order for countries and businesses to truly harness their full potential and ensure the high quality of credits utilised. That is where technology can play a pivotal role.

Singapore will lead the pack on net zero

In 2023, I am confident Singapore will continue leading the way in the region as the ESG and fintech hub, with the government taking a proactive stance on climate change that will have ripples across every sector.

As companies across all sectors race towards sustainability, sustainable financing remains a key enabler.

With a growing global ESG financing gap, Singapore’s financial institutions should leverage existing technology platforms to achieve effective sustainable finance products and financial portfolio monitoring, so that more capital can be mobilised to finance green projects where it is sorely needed.

Initiatives like the Monetary Authority of Singapore’s (MAS) Greenprint ESG Registry, powered by STACS’s ESGpedia, as well as the recent Climate Action Data Trust, are two clear examples of government agencies taking the lead and working with industry to deliver digital data platforms to provide better ESG data to support sustainable financing and decarbonisation across all sectors.

The city-state has committed to reduce its carbon footprint by 36 per cent by the end of the decade and has set up a Sustainable Finance Initiative to drive investments towards green and sustainability-related projects.

This is supporting the robust growth of green finance, sustainability-focused funds, and ethical investments, and we believe this trend will continue unabated this year.

With Asia being one of the regions most vulnerable to climate shocks, it’s important to remember that we are part of an association of countries and that cross-border collaboration with our neighbours is key to effectively tackling climate change at scale.

Our work with the state-owned power utility EGAT in Thailand to accelerate the transition to a low-carbon economy was an example of the kind of green cross-border collaboration we hope to see more of this year.

Separately, the UN ESCAP Sustainable Business Network (ESBN) Asia Pacific Green Deal announced in 2022 is a good example of an Asia-wide green initiative in a collaborative effort to mobilise investment that accelerates the transition to a green and inclusive economy.

With strong leadership from the public sector and great pickup from the private sectors, I am optimistic on what 2023 will hold for governments, businesses, and individuals as we all do our part to bring about a more sustainable planet – with the help of new green technologies.

The writer is managing director of STACS