Singapore sets out guidelines for first sovereign green bond issuance

An artist's impression of the Tuas Nexus waste management facility. Singa bonds will be used to finance nationally significant infrastructure. PHOTO: NEA

SINGAPORE - Singapore has outlined a road map for its first sovereign green bond with the publication of the Singapore Green Bond Framework, paving the way for the nation's first sovereign green bond to be issued in the coming months.

The move comes as Singapore explores the use of green bonds for climate change adaptation including coastal protection, said Minister in the Prime Minister's Office Indranee Rajah on Thursday (June 9) at the Singapore Sustainable Investing and Financing Conference, held at Sands Expo and Convention Centre.

"As a low-lying island city-state with one-third of our land less than 5m above sea level, Singapore must adapt to rising sea levels. We are hard at work in developing options to protect our coastline, combining engineering solutions with nature-based elements, such as the planting of mangroves and seagrasses," she said.

Ms Indranee, who is also Second Minister for Finance and National Development, said such infrastructure projects are expected to provide long-term environmental benefits for both current and future generations.

As the effects of climate change are increasingly felt in Asia, it is critical to speed up sustainable finance in order to create and enable green solutions, noted the minister.

The new national framework sets out guidelines for sovereign green bond issuances under the Significant Infrastructure Government Loan Act 2021, or Singa. It will also serve as the benchmark for corporate green bonds.

Singapore will issue its inaugural sovereign green bond under Singa. 

The Green Singapore Government Securities (Infrastructure) bonds, or Singa bonds, will be used to finance nationally significant infrastructure that meets the green criteria under the framework, such as the upcoming Jurong Region Line and the Cross Island Line.

All these will help with Singapore's own transition to a low-carbon economy and also advance the United Nations sustainable development goals, said Ms Indranee.

She added that Singapore hopes to deepen market liquidity for green bonds, attract green issuers, capital and investors, and catalyse sustainable financing in the region.

The Republic is now the largest sustainable finance market in South-east Asia, accounting for about half of sustainable debt issuances cumulatively. 

The publication of the framework dovetails with the Government's pledge during Budget 2022 to issue up to $35 billion of public sector green bonds by 2030.

The Ministry of Finance (MOF) and the Monetary Authority of Singapore (MAS) said in a joint release that proceeds from green bonds issued under the framework will be used to finance expenditures in eight categories, including renewable energy, energy efficiency, clean transportation and sustainable water and wastewater management.

Government agencies will suggest green projects, which MOF will curate.

Then the Green Bond Steering Committee chaired by Ms Indranee, and comprising officials from MOF, MAS, Accountant-General's Department, Ministry of Sustainability and the Environment, and Ministry of Transport, will approve eligible ones.

The agencies will then implement the projects and subsequently, MOF will publish annual reports on the allocation of funds and the project's impact.

The potential green expenditures or projects will have to fulfil additional legislative requirements under Singa, the Development Fund Act, the Financial Procedure Act and the Financial Regulations before they can qualify.

Net proceeds to eligible green expenditures are to be allocated in full within two years but in the initial stages of the framework, it could take up to three years.

MAS will helm the issuance and management of the Singa bonds on behalf of the Government.

DBS Bank was an adviser on the development of the framework, which was reviewed by Morningstar Sustainalytics, an independent environmental, social and governance research firm.

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