Singapore’s potential as a regional hub for impact investing

AS A multicultural, multilingual country with a deep and international financial market, Singapore serves as a bridge between developed and developing countries, and between East and West, in many areas. Impact financing can be one such area, with the Republic providing leadership and cultivating a deep pool of investors for opportunities in the wider region.

Apart from businesses which set up regional headquarters here to expand in South-east Asia, Singapore has attracted many family offices from around the world due to its low taxes, political stability, excellent legal regime, security and financial prowess. There are currently more than 700 family offices in Singapore, including Dalio Family Office, Vulcan Capital, and those linked to James Dyson, hotpot chain Haidilao, Li Ka-shing and Indian billionaire Mukesh Ambani.

Many of these family offices show support for impact and philanthropic investing, which has helped to build up an ecosystem here. According to the Global Impact Investing Network, many regional enterprises that have received impact investment are headquartered in Singapore, as are many private impact investors that operate across the region.

Meanwhile, South-east Asia has a large young population powering its economies, but faces growing environmental and social challenges brought about by climate change, population growth and urbanisation. Singapore is not insulated from the effects of climate change, and has made sustainability a national priority to address this. In particular, the public sector has set ambitious sustainability targets under the GreenGov.SG initiative, as part of the Singapore Green Plan 2030.

In view of the above, there is a unique window of opportunity where Singapore can leverage its deep network of investors – including pro-impact investing family offices – and emerging technology capabilities to contribute to regional impact investing in education, food security, health, green infrastructure and environmental care.

Impact and philanthropic investors generally have the risk absorption capacities required to invest in nascent and disruptive technologies. Such investors in Singapore can play a pivotal role in cultivating a pool of future impact-investing unicorns in the Republic and South-east Asia. In the process, Singapore will be well positioned to become a regional hub for startups that are focused on impact investing, and eventually, the various ESG (environment, social, governance) causes.

One recent example of impact investment in Singapore was the stake taken by publicly listed Thai President Foods in Singapore foodtech startup Alchemy FoodTech. Alchemy Foodtech’s patented Alchemy Fibre technology platform replaces sugars and carbohydrates in food to reduce their glycaemic index, while delivering “great taste and texture”. In an article by TechNode Global, Thai President Foods shared that they were very excited to be one of the first Thai impact investors supporting startups, like Alchemy, that create a positive impact in society.

The Singapore Exchange (SGX) can be a listing platform for some regional impact investors to seek a partial or full exit. It can also help these investors gain credibility and visibility, as they seek collaborations or partnerships with strategic global impact investors who want to build their footprint in the region.

With a growing impact-investing community in Singapore, global impact investors which are already listed elsewhere can seek a secondary or dual listing on SGX to profile themselves in the Republic and the region, especially after acquiring target companies in impact investments in South-east Asia.

Singapore leads the region in venture capital investment and has been home to several unicorns. However, many tech startups in the region have chosen to list on Nasdaq, the New York Stock Exchange or the Hong Kong Stock Exchange. In a speech in 2021, Singapore’s Minister for Trade and Industry Gan Kim Yong noted that one area in which Singapore can do better is making its public equity market more conducive for innovative growth companies. Having a vibrant home equity market becomes more pertinent as more Singapore impact investing startups mature and transform into regional and global players.

Education will be key to laying a strong foundation for an active and established impact and philanthropic investing ecosystem. Such education can provide updates on the more pressing environmental and social issues, show how technology can help address such issues, and explain how startups can seek impact and philanthropic investments.

For investors, education should include how to compare and select impact investment opportunities; how impact investing can enhance portfolio returns through diversification; and how impact investing can be a more transparent way to contribute to social causes, compared to monetary donations to charity.

Education should also cover how to organise and disclose information to assess the efficacy of impact investing. Singapore regulators themselves are actively addressing greenwashing issues by encouraging the market to enhance the quality of disclosures, and to allow access to more relevant impact investment information or data as well as promoting the consistency, comparability and integrity of such information.

To play an effective leadership role in impact investing in South-east Asia, Singapore should support the region through thought leadership; having a deep and wide pool of international impact investors and entrepreneurs to help find solutions to social and environmental challenges; and having a deep and sophisticated equity capital market where successful companies involved in impact investments may list.

Pei Sai Fan is an adjunct professor at the National University of Singapore and Nanyang Technological University, as well as an angel investor and adviser to fintech startups. Koh Boon Pin is a practitioner in the capital markets sector and sits on the board of the CFA Society Singapore.