Effects of Global Energy Crunch and High Interest Rates on Green Financing and Adjustments Needed
Prime Minister's OfficeSpeakers
Summary
This question concerns Mr Desmond Choo’s inquiry regarding how the global energy crunch and high interest rates affect green financing in Singapore and necessary adjustments to improve its adoption. Senior Minister Tharman Shanmugaratnam responded that despite global headwinds, Singapore has seen strong growth with over S$65 billion in green and sustainable bonds and loans issued from 2017 to 2021. Key policy adjustments include the Sustainable Bond Grant Scheme and Green and Sustainability-Linked Loan Grant Scheme to defray corporate costs, alongside government plans to issue S$35 billion in green bonds by 2030. The Monetary Authority of Singapore is also scaling blended finance for transition projects and developing a taxonomy to help financial institutions classify environmentally sustainable activities. Furthermore, efforts are underway with SGX to strengthen sustainability-related disclosures and leverage technology to improve investors' access to high-quality ESG data.
Transcript
34 Mr Desmond Choo asked the Prime Minister (a) how have the current global environment of global energy crunch and high interest rates affected green financing in Singapore; (b) whether adjustments are needed to improve green financing take-up rate; and (c) if so, what are these adjustments.
Mr Tharman Shanmugaratnam (for the Prime Minister): Headwinds arising from the energy crisis and higher interest rates have, generally, slowed global capital market and financing activity. Despite a slowdown in global green, social, sustainability and sustainability-linked (GSSS) bond issuance in 1Q2022, volumes have started to rebound in 2Q. Moody’s expects a 24% increase in global GSSS bond volumes in 2H2022, compared to 1H2022.
In Singapore, we continue to see strong interest and growth in green and sustainable financing. From 2017 to 2021, over S$65 billion of GSSS bonds and loans were issued here. Singapore-based financial institutions continue to see a strong demand for GSSS bonds and loans. PUB recently raised S$800 million through its inaugural green bond issuance. We have also seen issuances from corporates, such as Singtel and Ascott Residence Trust, this year. Our local banks, DBS, OCBC and UOB, have also committed to grow their sustainable finance portfolios.
MAS has been focused on promoting the growth of green and transition finance.
First, MAS’ Sustainable Bond Grant Scheme (SBGS) and Green and Sustainability-Linked Loan Grant Scheme (GSLS) have helped to defray the additional costs incurred by corporates when they conduct external reviews aligned with internationally-recognised sustainability principles.
Second, the Government has announced plans to issue up to S$35 billion of green bonds by 2030 to fund public sector green infrastructure projects. This will help grow our green bond market and deepen market liquidity for private sector green bond issuers.
Third, MAS will promote the scaling of blended finance to mitigate risk for investors and spur flows into marginally bankable but worthy transition projects in the region.
Fourth, MAS is putting in place underlying enablers to support the growth of green and sustainable finance. These include (a) working with industry players to develop a taxonomy to help financial institutions in Singapore classify activities as environmentally-sustainable, harmful or in transition, (b) working with SGX to strengthen the comparability and reliability of sustainability-related disclosures for listed companies, major financial institutions and retail ESG funds, and (c) using technology to enhance investors’ access to trusted and high-quality ESG data for decision-making.