How has Singapore designed its path to a greener and more climate-friendly type of development, whether in the area of consumer lifestyles and public awareness, financial ecosystem and choices energy? Southeast Asia’s most developed economy has a different background from its neighbours. But how Singapore is tackling the sustainability challenge, discussed in this series of 4 articles, is interesting and relevant to countries in the region. For more information, visit ReportingASEAN.net.
SINGAPORE—“Overall, it’s a good thing to have,” Khoo De Wan said of the environmental, social and governance (ESG) standards Singapore-listed companies are held to. “It can help attract more business, but by itself it is not enough to make a business an investable business. That’s my thought.
“Sad to say, the end goal [of investing] is monetary or financial, rather than environmental,” said Khoo, who has personally invested in stocks, bonds and funds for nearly 15 years.
Thinking like Khoo is what the Singapore Stock Exchange (SGX), Southeast Asia’s largest stock market, has sought to change over the past 6 years or so. It’s part of the city-state’s goal to be not only a global financial center – it’s the 4th most competitive in the world – but also a green center.
To promote the relevance of sustainability in investment portfolios and cultivate interest in sustainable investing, the exchange in 2016 introduced mandatory sustainability reporting as part of a “comply or comply” framework. ‘explain’ for all listed companies. The Singapore Stock Exchange tightened this requirement in December 2021, requiring companies in certain sectors – such as energy and agriculture – to make climate-specific disclosures in their sustainability reports.
OTHER REPORTS IN THIS SERIES
Almost all, or 99.5%, of SGX’s 569 issuers complied with the sustainability reporting framework in 2021.
“I can see some companies getting more serious,” said Tan Seng Chuan, managing director of sustainability consultancy Tembusu Asia, after the latest SGX policy decision. “[Previously,] I think companies still didn’t understand [the shift] because I noticed a number of them were just reporting for the sake of reporting.
But SGX’s requirements, along with the government’s Green Plan 2030, have “helped companies think about how they can report in a more sustainable way, not just to submit the report to SGX,” Tan added.
Considering SGX’s market capitalization of around 900 billion Singapore dollars ($661.5 billion) and the fact that 40% of its market capitalization comes from abroad, this will not be a small change in practices. companies for both Singapore and Southeast Asia.
The exchange has sought to further soften the allure of green investments and boost the profile of ESG-robust companies by introducing an ESG index suite, which tracks the performance of ESG-rated stocks and real estate investment trusts ( REIT).
However, the impact of these efforts on investor demand remains mixed.
“I know that [green investing] appeals to institutional investors and large retail investors – family offices,” said Chia Tek Yew, vice president of global consultancy Oliver Wyman, Singapore. “There is a huge demand and very little supply. So effectively that drives, to some extent, some of the pricing of companies that are considered greener.
But that enthusiasm hasn’t been matched by individual investors, Chia said.
Only 26% of Singaporeans are aware of ESG investing, according to the 2021 Asia Sustainable Investing Survey by Fidelity International. This figure is the lowest among respondents from the 5 East Asian economies where the survey was conducted, and well below the average of 43% in the survey results. The survey found that only 6% of Singaporeans currently invest in ESG, compared to 10% of respondents in the other four economies.
Meanwhile, over 70% of Singaporean respondents affirmed the importance of a sustainable lifestyle and 57% want to invest or save more sustainably in the wake of COVID-19.
“It’s not that I’m not pro-green. I guess you have to choose your battles. I mean, you can’t be an activist for everything, or you can’t care about everything, can you? said Anders Lee, who has been investing for just over a year.
For Lee, who works in international development, the pivotal factor is rather the political profile of the investments. “There are certain red lines, as if they were funding [political] parties that I don’t support, if they work with an authoritarian regime, that kind of stuff,” he said. “I think that will be my red line, rather than durability.”
Yet the space for green investments and financial space in Singapore continues to expand amid growing interest in sustainability, global citizenship and responsible business practices, especially given the COVID-19 pandemic. 19.
This shift has also been fueled in large part by a thoughtful push by the Singapore government to green its economy and financial services sector.
For example, Singapore introduced a carbon tax system in 2019 – so far the only Southeast Asian country to do so.
A Green Finance Action Plan, which listed priorities ranging from environmental risk management and green financial technologies to the development of green financial standards, was launched the same year. These recommendations were later included in the country’s Green Plan 2030, presented in February 2021. The Green Finance Action Plan also highlighted the need to expand the range of green offerings in Singapore’s investment landscape. .
The funding needed to green Asian economies would be substantial, the monetary authority’s deputy chief executive Benny Chey said in 2019. “These enormous green financing needs cannot be met by the public sector or bank loans alone. There is a pressing need, and opportunity, to diversify sources of green finance, and to unlock and attract private capital.
To this end, a program to encourage the issuance of green bonds was also restructured in 2019. Bond issuance plans for 19 billion Singapore dollars ($13.98 billion) of infrastructure projects green were announced in 2021. This amount is expected to eclipse the $8.1. billion of green bonds that ASEAN as a whole issued from 2016 to 2019.
Green financial technologies such as mobile apps can revolutionize access to these green investment instruments.
“Typically for us as individuals, you normally don’t have access to all of that. These are all expensive items that unless you are a [institutional] investor, unless you have $100,000 and above, you will find it difficult to invest in some of them,” said Chia, who is also the chairman of the sustainability committee of the Singapore FinTech Association.
However, the use of fintech solutions such as micro-loans and peer-to-peer payments can allow a wider segment of investors to have “minimal” access to green bonds, for example by allowing purchases at $2,000 rather than $100,000. -at least.
This increased accessibility, or what Chia calls the “democratization” of investment access, levels the playing field and can attract more investors.
The monetary authority’s Global FinTech Hackcelerator 2021 theme, “Harnessing Technology to Power Green Finance,” is another official push on this front. Among the three winners announced in November was Wattify, an app-based investment platform that reduces investors’ purchase to just 1 euro by tokenizing renewable energy assets using blockchain technology.
The Singapore government’s Climate Impact X (CIX) carbon exchange could also be a way for individual investors to get a slice of the greener pie. Launched as a test in October 2021, this market will allow the exchange of carbon credits between suppliers (such as forestry, mangrove and wetland projects) and buyers (companies, governments) around the world.
With good governance and transparency, platforms such as CIX can potentially enable speculative trading by small businesses or individual investors, Tan says. “It may not need another 20 years – I would say the next five years are the critical years. After the next 5 years, I think a lot more things would be more mature and more stable.
It will all depend on how individuals relate the desire for sustainability to where they put their money.
“[Sustainability] is at the corner of the eye, but I wouldn’t say it’s at the center. So I always keep an eye on it here and there, just to know how far it has evolved, how far it has been adopted. And from there, my mindset can change,” Khoo said.
— This article is part of Reporting ASEAN’s sustainability series.