MAS launches $15 million grant to spur financial institutions to participate in carbon markets

SINGAPORE – The Republic’s central bank is setting aside $15 million to equip financial institutions here with the resources they need to get involved in the country’s emerging carbon trading sector.

Financial institutions include banks, financial advisory firms, insurance companies and investors.

In announcing the Financial Sector Carbon Market Development Grant on Oct 28, the Monetary Authority of Singapore (MAS), alongside three government entities, said the grant will help financial institutions cover some costs and build the foundation for their sustained involvement in the carbon market.

The grant will be in place until 2028.

The three entities are the Ministry of Trade and Industry (MTI), the National Climate Change Secretariat (NCCS) and Enterprise Singapore (EnterpriseSG).

The carbon market refers to the global trade in carbon credits. Emitters, including companies and countries, can buy credits from carbon projects around the world to offset their carbon footprint and meet their obligations under domestic laws or international treaties.

Singapore has identified this sector as a key driver of sustainable economic growth for the Republic.

The authorities said in a statement that financial institutions play a key enabling role in the carbon market, from structuring transactions and financing projects to assessing risks and trading credits.

But they may also face high upfront costs in developing needed expertise and managing the complexity and risks of early transactions, they added.

Speaking on Oct 28 at the Asia Clean Energy Summit – part of the Singapore International Energy Week conference – Minister of State for Trade and Industry Gan Siow Huang said the new grant will help to defray manpower and transaction costs from financing and trading of carbon credit projects.

The grant will support the financial sector in two key areas.

One is to build carbon market capabilities. The fund by MAS can be used to form or grow teams in banks that specialise in carbon project financing, trading and insurance.

The grant also aims to spur financial institutions to get involved in carbon markets by alleviating upfront costs associated with developing, structuring and executing carbon credit transactions. These include legal services, conducting due diligence and insurance.

Applications for the grant will open on Nov 1, 2025, and more details on eligibility requirements and the application process are available on the MAS website.

Commenting on the fund, Mr Alvin Lim, chief executive of carbon project developer Climate Bridge International, said: “As carbon project financing is still a nascent field, most banks lack the expertise and tools to evaluate and structure such investments confidently.”

He noted that carbon projects often require years of upfront investment before a single credit is issued.

The MAS grant helps to bring capital closer to the ground, lowers developers’ costs and speeds up the project’s growth, added Mr Lim, whose firm is exploring carbon projects in eight countries, including Ghana, Rwanda, Thailand and the Philippines.

The grant was among the new initiatives announced by the Government on Oct 28 to improve trust in the carbon market while pushing for high-integrity credits.

Carbon credits can come from nature-based projects, such as reforestation efforts, or technological ones that include switching from pollutive firewood to cleaner cooking stoves.

One credit represents one tonne of planet-warming emissions that is removed from the atmosphere or prevented from being released.

Credits are deemed of high integrity if they help reduce or remove emissions from the atmosphere in a way that can be trusted and verified.

A revised 12-page guide for firms thinking of using credits was also launched on Oct 28.

The document was developed based on a public consultation that EnterpriseSG, MTI and NCCS carried out in mid-2025 to improve a draft document.

A key message of the draft is that companies should prioritise all possible ways to reduce their emissions before turning to carbon credits.

The revised guide includes additional guidance on how the feasibility of various emissions-cutting activities can be assessed. For example, in assessing a type of decarbonisation technology, firms should check if the solution is available at the appropriate scale for the company’s facilities.

In her speech, Ms Gan said that the voluntary carbon market – through which companies buy credits to meet their own voluntary targets, as opposed to fulfilling regulatory requirements – has faced headwinds in recent years.

“Concerns about the integrity, transparency and quality of voluntary carbon credits have eroded confidence, while inconsistent standards and negative publicity have raised reputational concerns,” she added.

Issues with carbon projects have made headlines in recent years, over fraudulent credits, sparking claims of greenwashing.

In 2023, for instance, The Guardian news outlet reported that more than 90 per cent of rainforest preservation credits did not represent genuine carbon savings. 

Ms Gan noted that such developments have caused many companies to hesitate to use voluntary carbon credits as part of their decarbonisation plans.

But the new initiatives could help to strengthen trust and promote credible participation in the voluntary carbon market, she added.

These developments are among the latest moves by the Government to shape up Singapore’s emerging carbon market this year.

To date, the Republic has signed 10 carbon trading agreements with countries including Ghana, Rwanda and Mongolia.

In September, it was announced that the Government is spending $76.4 million to buy more than two million credits from nature-based projects in Ghana, Peru and Paraguay.