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By Hao Liang & Jun Myung Song. As seen in the Singapore case, government support and commitment is crucial for developing an economy’s green finance capability and landscape, as companies and investors may not be incentivized to internalize environmental externalities. 

Green financing is to increase level of financial flows (from banking, microcredit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities” - UN Environment Programme

Singapore has emerged as a leader in promoting green finance in Asia by transiting towards a sustainable and low-carbon future. To foster green investments, Singapore has developed various initiatives and platforms such as Singapore Green Plan 2030 and Green Finance Action Plan, which provide frameworks to mobilise public and private sector efforts towards achieving a sustainable and climate-resilient Singapore.

Green finance and Environmental, Social, Governance (ESG) movements in the U.S. mostly follow a bottom-up approach, driven by corporations, institutional investors and activists. In Europe, in contrast, they largely follow a top-down approach, through government initiatives such as EU’s Sustainable Finance Action Plan and various country-specific regulations.

Singapore applies both approaches. In its green finance efforts, one party that plays the most vital role is the Monetary Authority of Singapore (MAS), the city-state’s central bank and financial regulatory authority. To encourage companies and financial institutions to raise funds for environmentally friendly projects, MAS has issued the Environmental Risk Management Guidelines across the banking, insurance, and asset management sectors. It has also launched various funding schemes to support green financing activities in the private sector.

For example, MAS set up a US $2 billion green investments programme to invest in public market investment strategies that have a strong green focus. In addition, MAS launched the Green Bond Grant Scheme and the Green Bond Program which catalyze the green bond market in Singapore and encourage issuers to align their financing with sustainability objectives. Moreover, MAS launched the Green and Sustainability-Linked Loan Grant Scheme to encourage more issuers to obtain green loan certifications. Under this scheme, eligible borrowers can receive grants of up to SGD 100,000 to defray the costs of engaging independent sustainability consultants to validate their green loan frameworks and processes. More recently, MAS launched the Finance for Net Zero (“FiNZ”) Action Plan in April 2023, where it built on the Green Finance Action Plan to include transition finance strategies.

Talent development is crucial in achieving Singapore’s ambition to become a global green finance hub, which prompts MAS also to pay close attention to education, research and market regulations related to green finance. In October 2020, together with nine leading global financial institutions, MAS launched Singapore’s first centre of excellence in this area, the Singapore Green Finance Centre (SGFC), co-managed by Imperial College Business School and Lee Kong Chian School of Business at Singapore Management University. A year later, MAS launched the Sustainable and Green Finance Institute (SGFIN) at the National University of Singapore. Meanwhile, the Singapore Exchange (SGX), supervised by MAS, organizes workshops, seminars, and educational programs to raise awareness and understanding of green finance among market participants. SGX also requires listed companies to disclose their carbon footprints and board gender diversity, alongside other initiatives promoting sustainability reporting, such as the digital ESG disclosure platform ESGenome,[1] one of the four platforms of Project Greenprint by MAS.

The international financial hub is now aspiring to become a leading global green finance hub. Singapore’s regulatory framework, infrastructure, and expertise in sustainable finance are expected to attract investors, companies, and professionals from around the world. According to the Sustainability Report 2021/2022 of MAS, Singapore is already “ASEAN’s largest sustainable finance market, accounting for close to 50% of cumulative ASEAN green and sustainability-linked bond and loan issuances. From 2018 to 2021, over S$39.8 billion of green and sustainability-linked loans have been issued in Singapore.”

As seen in the Singapore case, government support and commitment is crucial for developing an economy’s green finance capability and landscape, as companies and investors may not be incentivized to internalize environmental externalities. Indeed, the academic literature offers mixed findings on the relationship between a firm’s ESG performance and its financial performance. One SGFC working paper finds that a positive relationship exists between the two only when the government implements stringent environmental regulations. Another ECGI working paper by a SGFC author that was subsequently published at Management Science finds that government ownership is a strong predictor of a firm’s environmental commitment.

Nevertheless, Singapore also recognizes the importance of harnessing the private sector’s power through mobilizing capitals from investors, corporations and financial institutions to promote green finance. For example, MAS focuses on scaling the use of blended finance and voluntary carbon markets to support the region’s transition. Besides co-investing, MAS also works closely with industry partners on developing transparent and comparable frameworks for ESG and impact measurement and reporting that are consistent with global frameworks such as International Sustainability Standards Board (ISSB) and EU’s CSRD.

In conclusion, Singapore’s approach to driving the transition to a more sustainable and climate-resilient economy is a co-operative effort between the public and the private sectors. Clearly, regulators play a crucial role in creating an enabling environment for green finance through setting up taxonomies, rules and guidelines. Yet, it is equally important to mobilise the capital from the private sector and investors through innovative financial tools and appropriate incentives. We hope that Singapore sets a good example and a clear pathway for greener and sustainable finance in Asia and globally.


[1] Through ESGenome, SGX-listed companies can carry out their baseline sustainability reporting based on a set of 27 SGX core ESG metrics, and additional disclosures in line with globally recognised ESG reporting standards and frameworks such as Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD) and the UN Sustainable Development Goals (SDGs).

By LIANG Hao, Ho Bee Professorship in Sustainability Management & Associate Professor of Finance; Co-Director of Singapore Green Finance Centre and SONG Jun Myung, Research Fellow at Singapore Green Finance Centre. 

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This article features in the ECGI blog collection Corporate Governance in Asia

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