Sustainable financing holding up well

More than $8 billion in green, social and sustainability bonds have been issued in Singapore.
More than $8 billion in green, social and sustainability bonds have been issued in Singapore.PHOTO: ST FILE

Sustainable financing and investment flows have held up well in the first half of this year, despite the Covid-19 pandemic and general climate of economic weakness.

Monetary Authority of Singapore (MAS) managing director Ravi Menon noted that Singapore is Asean's largest green finance market, accounting for close to half of cumulative Asean green bond and loan issuances.

At the virtual Financial Times Investing for Good Asia conference yesterday, he said Singapore is steadily developing financial solutions to address climate risks.

For example, the MAS' Insurance-linked Securities Grant Scheme has seen strong take-up since its launch in 2018. The scheme funds up to 100 per cent of the upfront costs incurred in issuing catastrophe bonds out of Singapore. These are basically assets that pay insurers if they suffer cataclysmic losses.

Mr Menon noted that within two years, there have been nine catastrophe bond issuances in Singapore. "This includes the first Asian sovereign and catastrophe bond covering earthquake and typhoon risks in the Philippines," he said.

More than $8 billion in green, social and sustainability bonds have also been issued in Singapore since the introduction of the MAS' Sustainable Bond Grant Scheme in 2017, supporting the development of renewable energy projects, improving the energy efficiency of buildings, and financing social enterprises aimed at helping lower-income women, among other things.

By the year end, the MAS will launch a similar grant to support sustainability-linked loans, as companies in Asia rely more on bank loans than bonds.

Mr Menon said the grant will fund the costs of conducting external reviews and ratings for green and sustainability-linked loans, and promote the development of sustainable lending frameworks that provide simplified processes and standardised criteria for borrowers. This will reduce the cost of green borrowing and encourage more small and medium-sized enterprises to tap such loans, he added.

At a separate event on Monday, Mr Menon noted that there is greater consciousness about sustainability.

"The pandemic has made us all a lot more sensitive and aware of how vulnerable we are to the forces of nature."

A version of this article appeared in the print edition of The Straits Times on October 14, 2020, with the headline 'Sustainable financing holding up well'. Print Edition | Subscribe