Parliamentary Replies
Published Date: 28 February 2019

Reply to COS Cuts on GEMS, corporate governance, and sustainable financing

For Parliament Sitting on 28 February 2019

Name and Constituency of MP
Associate Professor Daniel Goh Pei Siong, Non-Constituency Member of Parliament

1. Is GEMS essentially a subsidy for SGX and the investment sector? Will such grants be effective for a capital/cash-rich sector? Will GEMS end up subsidising current equity research and listings that would happen anyway?
Name and Constituency of MP
Mr Dennis Tan Lip Fong, Non-Constituency Member of Parliament

2. Some recent corporate failures point towards a lax corporate governance structure and can endanger shareholder value and confidence especially with retail investors. Call for an independent taskforce to be convened to review the corporate governance framework, evaluating the need for a government agency to provide oversight on corporate governance standards and improve audit quality.

Name and Constituency of MP
Ms Anthea Ong Lay Theng, Nominated Member of Parliament

3. As of Sep 2018, 17 banks have committed to no longer financing coal power in light of this challenge. More than 1,000 investors have pledged US$8 trillion to divest away from fossil fuels and invest in renewables within 3-5 years. As a leading financial hub, Singapore must play a deeper role in leading the financial transition as a force for good. How we invest and lend is a reflection of our values and principles.

How is the Ministry using the tools and levers available to it to ensure that as we transform our financial industry to adapt to a bright digital future, we are also ensuring that our regional financial strength is not exacerbating the physical risks and economic risks we will face in the future from climate change? What concrete measures are being considered to see a shift of capital deployed away from unsustainable industries and companies as we spend large amounts of money to adapt our infrastructure to increasing flood and sea level risks?

Answer by Mr Ong Ye Kung, Minister for Education, on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in charge of MAS:


1     Mr Speaker, let me start by addressing Associate Professor Daniel Goh’s questions on the Grant for Equity Market Singapore, or GEMS. 

2     GEMS is not a subsidy scheme for SGX or any ‘cash-rich’ sector. Its primary aim is to strengthen public financing channels for growth enterprises, in particular small and medium-sized enterprises (SMEs), because a vibrant public equity market provides these enterprises with access to permanent capital for growth.  GEMS does so by defraying listing-related expenses, and promoting better research coverage of the sectors they are in and their business models. 

3     GEMS is funded by the Financial Sector Development Fund, which was set up in 1999 following the demutualization and listing of the Singapore Stock Exchange.  So it is not funded from tax-payers. 

4     The Member also asked about the effectiveness of GEMS.  The Scheme was designed in response to the feedback that a vibrant equity market requires not only new listings, but also sustained investor interest post-listing.  There are certain sectors that we can do better in attracting listings; high growth sectors being one example.  There are also gaps in investment coverage for small and mid-cap listed enterprises and new business models.  This is why the scheme comprises a listing grant and research-related grants to improve the equity research ecosystem.
5     The quantum of listing grant has thus been tiered to favour high growth areas, such as the technology sectors.  Well-developed sectors, such as Real Estate Investment Trusts and Business Trusts, do not qualify for the grant.  Applicants for the research grant are also required to provide coverage for small and mid-cap listed enterprises.

On Corporate Governance

6     Mr Dennis Tan asked about the standard of corporate governance.  He called for an independent taskforce to review the corporate governance framework, and a government agency to provide oversight on corporate governance standards, and improve audit quality.

7     Both features already exist today.  MAS, as the statutory regulator of Singapore’s capital markets, and SGX, as the frontline securities market regulator, oversee the corporate governance standards of listed companies, set out in the Code of Corporate Governance.  The SGX Listing Rules in turn require companies to disclose how the companies’ practices conform to the principles in the Code.  The Accounting and Corporate Regulatory Authority is responsible for upholding financial reporting and audit quality, by inspecting the statutory audits performed by public accountants.

8     As for an independent taskforce to review the corporate governance framework, MAS convened such an industry-led Corporate Governance Council in 2017.  MAS accepted all the recommendations that the Council submitted in August 2018.  Consequently, changes were made to the Code and the SGX Listing Rules to implement the recommendations.

9     In line with one of the key recommendations of the Council, MAS established a permanent Corporate Governance Advisory Committee (“CGAC”) earlier this month.  The CGAC comprises prominent industry leaders with the stature and corporate experience to advocate good corporate governance practices.  It will identify current and potential risks to the quality of corporate governance in Singapore and advise the regulators on corporate governance issues.  

10     High standards of corporate governance help sustain good corporate performance for the long term.  It ensures good systems and structures to evaluate investments, manage risks, safeguard all shareholders’ interest, conduct leadership succession and other key processes in the company.  

11     However, risks are inherent in investment.  One of the key aims of regulation is to require that investors have access to up-to-date, material information such as a listed company’s financial condition and prospects, in order to make informed investment decisions. Investors on their part need to pay close attention to what is disclosed, look beyond potential returns and assess if they can also accept the risks that come with specific investments.

12     The regulators – ACRA, MAS, and SGX –  will continue to calibrate rules and work with stakeholders such as the new CGAC to strengthen the corporate governance standards and practices in Singapore.  At the same time, we will continue to educate the investing public on the trade-off between risk and return, through the MoneySense programme.

On Sustainable Financing

13     Ms Anthea Ong asked about sustainable financing.
14     MAS is committed to advance the agenda for sustainable finance. As a member of the Network for Greening the Financial System, MAS works closely with our international counterparts to develop best practices for financial institutions (FIs) to manage climate risks and opportunities. Let me outline MAS’ efforts in three key areas.

15     First, our local banks have implemented policies aligned with the Guidelines on Responsible Financing issued by the Association of Banks in Singapore, to evaluate their borrowers’ environmental, social and governance risks, and help borrowers improve their sustainability profiles. In this regard, the local banks have also committed to stop new financing of inefficient coal plants. MAS also expects insurers to consider environmental risks in their risk assessments, and has introduced a climate scenario in our industry-wide stress tests. 

16     Second, the financial industry is promoting green financing, such as green bonds.  Over $2 billion of green bonds have been issued to date, following the introduction of the MAS Green Bond Grant Scheme. Recently, the Scheme was expanded to cover social and sustainability bonds.

17     Within the asset management sector, the large majority (80%) of sizeable asset managers in Singapore are signatories to the UN Principles for Responsible Investment, and take on board environmental, social and governance risks considerations in their investment processes. In MAS’ own investment portfolio, we have been actively working with our fund managers to ensure that ESG considerations are incorporated.

18     Finally, to strengthen the region’s financial resilience to disaster risks and address protection gaps, the Southeast Asia Disaster Risk Insurance Facility will be set up in Singapore this year as ASEAN’s first regional catastrophe risk pool.  It will better cover emergency response costs in the aftermath of catastrophes.

19     MAS will continue to work with key stakeholders in the financial industry to promote the sustainability agenda.