Sustainability-related loans in S’pore register sixth year of rise to $30.4b

SINGAPORE - The amount of green, social and sustainability-linked loans issued in Singapore has steadily increased for the sixth consecutive year, reaching $30.4 billion in 2023.

This is an increase from $25.2 billion in 2022 and $21.1 billion in 2021, said the Monetary Authority of Singapore’s (MAS) sustainability report out on July 4.

Green loans are used to finance sustainable projects, while social loan proceeds must go to social projects. Sustainability-linked loans provide an incentive for borrowers to progress towards pre-determined sustainability goals.

Singapore is also Asean’s largest market for green, social, sustainability and sustainability-linked bonds and loans, accounting for more than half the market, MAS added.

But the amount of green, social, sustainability and sustainability-linked bonds decreased in 2023, to $7.4 billion, from $10.1 billion in 2022. This comes amid a global slowdown in bond issuances due to rising interest rates and inflation, MAS said.

Deputy Prime Minister Gan Kim Yong, who is MAS chairman, said in the report: “As promoter of Singapore as an international financial centre, MAS works with financial institutions to develop a vibrant green and sustainable finance ecosystem to support Asia’s transition to a low-carbon future.

“Climate change has profound implications on our economy. The financial sector is exposed to this through its financing, insurance, and investment activities, and financial institutions need to mitigate physical and transition risks arising from climate change.”

He added that there are also significant opportunities for financial institutions based in Singapore to support a credible and smooth transition to a state of net-zero emissions in Asia.

“This could be through the channelling of capital to green and transition technologies, as well as the fostering of innovative financing solutions to build a sustainable future,” he said.

He noted that MAS is also the guardian of Singapore’s official foreign reserves, which means that it has to include considerations of climate change risks and opportunities in its investment framework. This will protect the official foreign reserves portfolio from the impact of climate transition risks, he said.

Such measures include monitoring the engagement efforts of MAS’ external fund managers in influencing positive change, investing in low-carbon solutions and excluding companies that get more than 10 per cent of their revenue from thermal coal mining and oil sands activities. Oil sands are natural deposits containing bitumen, a highly viscous form of petroleum.

He added that such measures will lead to the equities investments in the portfolio dropping by up to 50 per cent in their average level of carbon intensity by 2030, compared with the base financial year of 2018.

More is also being done to strengthen the talent pool for sustainability-related jobs.

MAS chief sustainability officer Gillian Tan said a jobs transformation map for sustainable finance was launched in April, showing that new sustainable finance-related tasks will be added to existing jobs and new roles will also emerge.

The jobs transformation map revealed that more than 50,000 professionals in the financial services sector will see new sustainable finance-related tasks added to their jobs to a moderate to high degree across career tracks. Some 20 unique job roles were also identified as high-priority roles for upskilling, such as relationship managers in corporate banking, and portfolio managers.

Training providers and institutes of higher learning have stepped up to increase training capacity, Ms Tan noted.

The Nanyang Technological University will be offering an executive certificate in a carbon markets programme that covers foundational knowledge of carbon markets, carbon trading and carbon measurement, for instance.

In addition, Singapore Management University will launch a sustainable finance track under the finance major within its bachelor of business management programme. This major will offer foundational and industry-specific knowledge on sustainable finance themes.

More will also be done to help companies with their climate-related disclosures.

MAS said: “A vibrant and robust sustainable finance ecosystem needs to be built on a strong foundation of trusted, credible and transparent data.”

MAS announced a digital platform called Gprnt in November 2023, which will be launched in phases in 2024. The platform will use technology to simplify how the financial sector and real economy collect, access and act upon environmental, social and governance data to support their sustainability initiatives. It will serve businesses and financial institutions.

The platform will focus first on automating basic climate reporting by small and medium-sized enterprises by automatically converting their economic data into sustainability-related information. It will also progressively scale up its capabilities to support larger companies and their climate reporting needs.

As an organisation, MAS has also put in place initiatives such as a carbon budget for air travel.

It also encourages people to use “fit-for-gifting” currency notes for festive gifting. Such notes are more sustainable and reduce carbon emissions from the issuance of new notes, MAS said.

It saw a 5 per cent increase in the take-up of such notes in the Chinese New Year period of 2024 compared with 2023, with about 11.7 million pieces of these notes exchanged in the festive period of 2024.

Ms Tan said: “The road ahead is not easy nor straightforward. As a regulator and supervisor, MAS is putting in place supervisory expectations around transition planning to bolster resilience for individual financial institutions.”

She added that MAS is also working with academia and financial institutions to better understand the key nature-related risks for Singapore and the region.