A Vibrant Green Finance Ecosystem
Green Finance Solutions
MAS' Green Finance Action Plan aims to support a sustainable Singapore and facilitate Asia’s transition to a sustainable future. This includes catalysing the growth of green finance solutions that enable companies to invest in green projects and assets, and adopt sustainable business practices.
Sustainable Bond Grant Scheme (SBGS)
MAS launched a Green Bond Grant Scheme (GBGS) in June 2017 which catalysed the green bond market in Singapore. The GBGS enables issuers to offset the additional costs of issuing green bonds as compared to conventional bonds, and promotes the adoption of internationally accepted standards. Since then, two rounds of enhancements were made to reflect evolving market developments and best practices.
In January 2019, the scope of GBGS was expanded to include social and sustainability bonds and renamed as the Sustainable Bond Grant Scheme (SBGS).
In November 2020, the scope of SBGS was expanded to include sustainability-linked bonds, and cover the post-issuance costs of engaging independent sustainability assessment and advisory service providers to obtain external reviews or reports.
Green, Social and Sustainability Bond Issuance Volume in Singapore (2017-2020)
Source: MAS Statistics
Since its inception, more than S$11 billion of green, social and sustainability bonds have been issued in Singapore. There has been strong interest amongst issuers to issue such bonds in recent years. This is demonstrated by the marked increase in issuance volumes in 2019 and 2020, where S$4.8 billion and S$3.8 billion worth of such bonds were issued respectively.
Notable issuers in 2020 included:
- Singapore’s first corporate USD green bond from Vena Energy. The US$325 million green bond issued in February 2020 was used to refinance existing loans for the development, construction and operation of renewable energy projects.
- The National University of Singapore became the first university in Asia to issue a green bond. The S$300 million green bond issued in May 2020 was used to finance new projects targeted at green buildings, renewable energy, and sustainable management of water and land.
- Star Energy Geothermal Group issued a dual tranche jumbo-sized green bond amounting to US$1.1 billion in October 2020, which was the first investment grade green project bond from Indonesia. A portion of the proceeds will be used to refinance eligible green assets used in the development, construction and operation of geothermal energy generation facilities in Salak and Darajat, West Java, Indonesia.
MAS will continue to work with the financial sector to support the growth of both green and sustainable financing instruments in Singapore.
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Green and Sustainability-Linked Loan Grant Scheme (GSLS)
The first of its kind globally, MAS’ Green and Sustainability-Linked Loan Grant Scheme was launched in November 2020 to encourage businesses to take up green and sustainability-linked loans.
The grant defrays the expenses of engaging independent service providers to validate the green and sustainability credentials of the loan. The grant also encourages banks to develop green and sustainability-linked loan frameworks to make such financing more accessible to small and medium-sized enterprises (SMEs).
With the launch of the GSLS, BNP Paribas, OCBC Bank and UOB introduced green and sustainability-linked loan frameworks which feature standardised criteria and processes to streamline assessments of green and sustainable lending to corporates. This supports the financing of circular economy projects, renewable energy, energy efficiency activities and promote sustainable supply chain practices of large corporates and SMEs.
Green and Sustainability-linked Loan Volumes in Singapore (2017-2020)
Source: Aggregated data from Climate Bonds Initiative reports and MAS’ compilation of green and sustainability-linked loans from public sources
From 2017 to 2020, over S$22.5 billion of green and sustainability-linked loans have been issued in Singapore. While green loan volumes continue to make up a large proportion of Singapore’s sustainable loan market, we see growing momentum in sustainability-linked loans, with volumes tripling from 2018 levels. Compared to green loans, sustainability-linked loans are a relatively new instrument and are gaining wider market adoption due to their flexibility in the use of proceeds and financial incentive awarded to borrowers (in the form of interest rate discounts) when sustainability performance targets are met.
Notable borrowers in 2020 include the S$1.95 billion green loan by M+S Pte Ltd, which was the largest green loan secured by a real estate company in Asia-Pacific. The proceeds of the loan will be used to partially refinance the office and retail components of Marina One. PSA Marine obtained a €30 million sustainability-linked loan, the first in Singapore’s maritime industry. The loan features an interest rate adjustment linked to ESG targets, which include requiring a fleet of PSA Marine’s Crew Transfer Vessels to be substantially deployed to support offshore wind energy-related activities.
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Catastrophe Bonds / Insurance-Linked Securities (ILS)
Insurance-linked securities can play an important role in insuring property against natural catastrophe risks such as windstorms and earthquakes. ILS offer insured parties a viable alternative to traditional insurance/reinsurance, diversification in the source of risk capital, multi-year coverage and competitive rates compared to traditional insurance/reinsurance. MAS launched the ILS Grant Scheme in 2018 to encourage ILS issuances in Singapore and develop Singapore as the leading ILS hub in Asia. The scheme was extended for another 2 years until 31 December 2022, given strong interest in ILS issuance.
Since the inaugural catastrophe bond issuance by the Insurance Australia Group back in 2018, a total of 14 catastrophe bonds have been issued in Singapore as of 30 April 2021.
Notable issuances include the first:
- full Rule 144A catastrophe bond sponsored by Security First Insurance Company in May 2019, which reflects Singapore’s capabilities to support the most liquid type of ILS offering;
- Asian sovereign catastrophe bond issued through the World Bank-owned International Bank for Reconstruction and Development’s Capital-At-Risk Notes program that covers earthquake and typhoon risks, which was also the first catastrophe bond listed on the Singapore Exchange;
- Pan-Asian catastrophe bond issuance globally that covers multiple natural catastrophe perils across more than 10 countries in December 2020, sponsored by MS Amlin Asia Pacific Pte Ltd.
MAS will continue to work with the financial sector to grow the Asian ILS market and facilitate the use of innovative ILS structures to narrow the protection gap in Asia.For further reading
Voluntary Market for Carbon Credits
Announced on 20 May 2021, the Climate Impact X (CIX) is a new global carbon exchange and marketplace anchored out of Singapore, focused on carbon credits from nature-based solutions. CIX is an initiative borne out of the Alliance for Action on Sustainability under the Emerging Stronger Taskforce.
CIX is a joint venture by DBS Bank, Singapore Exchange, Standard Chartered and Temasek. It comprises a Carbon Exchange catering primarily to companies and institutional investors, to facilitate the sale of large-scale high quality credits through standardised contracts. CIX also has a Project Marketplace, which will provide a curated selection of nature-based solutions projects to enable firms to address their specific sustainability goals. CIX will draw on technologies such as satellite monitoring, artificial intelligence, and blockchain to distil key data on emission reduction and removal projects to verify the quality of the carbon credits that they generate. The Carbon Exchange and Project Marketplace will be launched by the end of 2021.
The development of a credible and well-functioning market for voluntary carbon credits is critical to global efforts to achieve net zero emissions by 2050. Such a market will mobilise finance at scale towards emission reduction and removal projects, and complement companies’ internal decarbonisation efforts. As a growing number of companies develop ambitious emission reduction targets and strategies, the Taskforce on Scaling Voluntary Carbon Markets
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