Singapore’s SGD 35 Billion Green Bond Plan to Boost Sustainable Financing Capabilities

Fitch Ratings has stated that Singapore’s plan to issue up to SGD 35 billion in “Green Bonds” through 2030 will support the development of the country’s sustainable financing capabilities. The move will also support the government’s efforts to establish a green taxonomy that will enable financial providers to align their investments and lending with their environmental impact. The issuance of the sovereign green bonds is expected to take place in the second half of 2022. However, Singapore has already dipped its toes into green bonds issuance, with the local Housing & Development Board raising S$1b in March 2022 for the development of green buildings.

Singapore’s plan to issue up to SGD35 billion in green bonds through 2030 will support the development of sustainable financing capabilities and the establishment of a green taxonomy. The funds raised will be utilized to promote initiatives that support adaptation to climate change, sustainable resource usage, and clean energy. The issuance of the green bonds is a testament to the government’s commitment to sustainable development and combating climate change. Singapore aims to achieve net-zero carbon emissions by or around 2050 and establish a broader green finance ecosystem by then.

The green bonds will be issued under safeguards that include a gross borrowing limit and strict criteria for qualifying projects, and the impact on the sovereign’s credit profile is expected to be marginal given Singapore’s net creditor position and prudent fiscal management. The green bonds and carbon credits trading schemes are part of the government’s plan to establish a broader green finance ecosystem, which could support funding for sustainable finance initiatives in Singapore and the broader region while enhancing the country’s strengths as a financial center.

The green taxonomy initiative is aimed at promoting the development of a green finance ecosystem by providing a classification system and improving disclosure. It is intended to categorize investments according to their environmental impact, making it easier for investors to identify sustainable investments. The second draft of the taxonomy proposes a traffic-light system for the three sectors most significant for greenhouse gas emissions: energy, transport, and real estate. The system categorizes investments as green, yellow, or red, indicating their level of environmental impact. This would reduce the risk of greenwashing and provide investors with a clearer understanding of sustainable investments, ultimately promoting the development of a sustainable financial market.

Singapore’s issuance of green bonds reflects its effort to lead the way in sustainable financing and become a leader in the green finance ecosystem. The funds raised will promote sustainable development and combat climate change, thereby enhancing Singapore’s position as a leader in the region’s sustainable finance initiatives. Moreover, the issuance of green bonds and the establishment of a green finance ecosystem will attract investors seeking environmentally conscious investments, thereby enhancing Singapore’s financial center position.