Leaning forward on climate action in Asia

Global momentum to combat climate change has remained strong with global clean energy investment rising by over 40% since 2020. However, more effort needs to be made to scale public and private capital to support transition in Asia. According to the International Energy Agency, much of the financing in renewable energy since 2020 was directed to advanced economies and China, even though emerging economies account for two-thirds of the world’s population. In contrast, the share of clean energy investments in emerging and developing economies has fallen in recent years to only 15%. The scale of climate investment gap in emerging and developing Asia needed to meet climate mitigation and adaptation demand is huge, with the International Monetary Fund estimating it to be more than US$800 billion annually. Financing transition activities, beyond green activities, is also particularly salient for Asia due to its higher reliance on fossil fuels. 

MAS has stepped up efforts to support an orderly transition

In Singapore, MAS has stepped up our efforts to support an orderly transition to net zero for Singapore and the region. Key initiatives that we have launched in the past year include:

• Transition Planning: To support an orderly transition to net zero, financial institutions (FIs) will need robust internal strategic planning and risk management processes to prepare for both risks and potential changes in business models associated with the expected transition and the physical effects of climate change. In October 2023, MAS published a set of consultation papers on transition planning for banks, insurers and asset managers, which set out expectations for FIs to engage, rather than divest from, their customers and investee companies, and to adopt mitigation and adaptation strategies to deal with the physical effects of climate change. FIs are also expected to contextualise potential short-term increases in emissions by taking a multi-year view in financing activities backed by credible transition plans. The Guidelines will be finalised in the later part of 2024. 

• Blended finance: Public-private partnerships through blended finance platforms that bring together concessional and commercial capital will be an important means to de-risk projects and to crowd in commercial capital at scale. In December 2023, MAS announced the Financing Asia’s Transition - Partnership (FAST-P), a blended finance initiative which aims to raise up to US$5 billion to support the financing of green and transition projects in Asia. Singapore is working closely with multi-lateral development banks, sovereign partners and philanthropic organisations, to pool together concessional capital to de-risk projects and catalyse private sector financing.

• Carbon Credits: The early phase-out of coal-fired power plants (CFPPs) in Asia is critical to the region’s successful energy transition, as emissions from coal power constitute one-third of the region’s greenhouse gas emissions. MAS published a working paper in September 2023, setting out how high integrity “transition credits” can be generated from the emissions reduced through retiring a CFPP early and replacing it with cleaner energy sources. The revenue from selling these credits could provide the plant owners and financiers with the necessary incentive to retire CFPPs early. To develop transition credits into a viable market solution, MAS launched a transition credits coalition (TRACTION) including FIs, NGOs, and energy sector experts at COP28. In addition, MAS announced two transition credits pilot projects to test the feasibility of integrating transition credits in the early retirement of existing CFPPs: one with ACEN Corporation, Coal-to-Clean Credit Initiative and Climate Smart Ventures, and another with the Asian Development Bank.  

• Data and Definitions: Published in December 2023, the Singapore-Asia Taxonomy (SAT) is the world’s first multi-sector transition taxonomy covering eight focus sectors. The SAT includes transition activities that are relevant to Asia such as natural gas plants with technological readiness to deploy hydrogen. It also supports global developments in technology, fuels, and processes that seek to reduce emissions in hard-to-abate sectors such as industrial, maritime, and aviation. To promote the use of the SAT, MAS has expanded its sustainable bond and loan grant schemes to include transition bonds and loans that are aligned with the transition category under the SAT. MAS is also mapping the SAT to the International Platform for Sustainable Finance (IPSF)’s Common Ground Taxonomy (CGT), to support more cross-border sustainable financing solutions.  

Create capacity to lead climate action

Our efforts to advance the net zero transition and sustainability must be undergirded by a strong sustainable finance ecosystem and capabilities. The Singapore Sustainable Finance Association (SSFA), set up with the support of MAS, was launched in January 2024. The SSFA comprises members from banks, asset managers and insurers, as well as the real economy, and will work closely with MAS to advance initiatives to develop Singapore as a leading sustainable finance centre.

The Sustainable Finance Jobs Transformation Map (SF JTM), which was launched in April 2024, highlighted that new sustainable finance-related tasks will be added to a number of financial sector jobs to a moderate to high degree, and that new roles in areas such as Sustainability Risk and Sustainability Strategy will emerge. Training providers and institutes of higher learning have responded to our call to enhance training capacity: 

• Training providers such as the Asian Banking School (Singapore) have rolled out new training courses in areas such as sustainability risk management and carbon markets, and are also providing role-based training for relationship managers in sustainability investment management.

• The Nanyang Technological University will be offering an Executive Certificate in Carbon Markets programme which covers foundational knowledge of carbon markets as well as technical topics such as carbon trading, carbon MRV (Measurement, Reporting, and Verification), and project development.

• Singapore Management University will launch a Sustainable Finance Track under the Finance major within its Bachelor of Business Management program. The new major aims to offer foundational and industry-specific knowledge on various sustainable finance themes.

Conclusion

The road ahead is not easy nor straightforward. As a regulator and supervisor, MAS is putting in place supervisory expectations around transition planning to bolster resilience for individual financial institutions. MAS has also recently commenced work with academia and our financial institutions to deepen our understanding of key nature-related risks for Singapore and the region, given the close nexus between climate and nature. 

MAS will continue to partner with industry to develop markets and innovative solutions to close the climate and transition financing gap. Together with our partners, we will forge ahead in enabling the transition to a net zero future. 

Gillian Tan
Chief Sustainability Officer