Singapore is greening the investment landscape

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In recent years, Singapore has pushed for greener standards in the investment and finance market, as well as the economy as a whole. Joel Chong

“Overall, it’s a good thing to have,” Khoo De Wan said. He was talking about the Singapore Environmental, Social and Governance, or ESG, standards that listed companies in the country must meet. The local resident and investor added, “It can help attract more business, but by itself it’s not enough to make a business investable. That’s my thinking.”

“Sad to say, the end goal [of investing] is monetary or financial, rather than environmental,” Khoo said.

Thinking like Mr Khoo is what the Singapore Stock Exchange (SGX) has sought to change over the past six years or so. It’s part of the city-state’s goal to be not only a global financial center – it’s the fourth most competitive in the world – but also a green center.

To promote the relevance of sustainability in investment portfolios and draw attention to sustainable investing, the exchange in 2016 introduced mandatory sustainability reporting as part of a “comply or explain” framework 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.

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].”

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,” Mr. Tan.

Considering SGX’s market capitalization of around 900 billion Singapore dollars (21.9 trillion baht) and the fact that 40% of its market capitalization comes from abroad, this will not be a slight change. in business practices in 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 Chairman 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, says Chia.

According to a 2021 Asia Sustainable Investing Survey, only 26% of Singaporeans are aware of ESG investing. This figure is the lowest among respondents from the five East Asian economies where the survey was conducted, and well below the average of 43% of 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 due to Covid-19.

“It’s not that I’m not pro-green – I guess you have to pick your battles,” 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 financing [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 sustainability.”

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.

The funding needed to green Asian economies would be substantial, the monetary authority’s deputy director general Benny Chia said in 2019. “These enormous green financing needs cannot be supported by the public sector or bank credit alone. an opportunity, to diversify sources of green finance, and to unlock and attract private capital.”

Green financial technologies such as mobile apps can further revolutionize access to these green investment instruments.

“Generally for us as individuals you normally don’t have access to all of that. It’s all the big ticket items that unless you’re a [institutional] investor, unless you have $100,000 and above, you will find it difficult to invest in some of them,” Mr. Chia said.

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. This increased accessibility, or what Mr. Chia calls the “democratization” of investment access, levels the playing field and can attract more investors.

Ultimately, a lot will depend on how individuals link the drive 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.©2022 ASEAN Reports

This is part of Reporting ASEAN’s Lens Southeast Asia series.

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