Singapore lays out guidelines for inaugural sovereign green bond issuance
Singapore yesterday (June 9) introduced a set of guidelines for the issuance of sovereign green bonds – the first of which can be expected in the coming months - as part of the city state’s green transition plan.
The Singapore Green Bond Framework, which sets out the guidelines for public sector issuers of green bonds, was announced by Indranee Rajah, second minister for finance and national development at the Singapore Sustainable Investing and Financing Conference at Ecosperity Week 2022.
A BOOST TO GREEN FINANCING
The move, yet another effort by the government to support the development of the green finance market in Singapore and accelerate sustainability financing, comes four months after its announcement to issue up to S$35 billion ($25.4 billion) of public sector green bonds by 2030 during the budget presentation in parliament in February.
The framework is aligned with internationally recognised market principles, standards, and best practices, said Rajah.
“This ensures that the framework will serve as a benchmark for the corporate green bond market,” she said, adding that Sustainalytics – a sustainability rating and research agency - has assessed the framework to be credible and aligned with the ICMA Green Bond Principles and the ASEAN Green Bond Standards.
The proceeds from the green bonds – the first of which can be expected to be issued in the coming months – will be deployed in eligible projects such as renewable energy, green buildings, clean transportation, wastewater management, and climate change transition, according to a joint press release by the Finance Ministry and Monetary Authority of Singapore yesterday.
“Our investments into the eligible green projects will facilitate Singapore's transition to a low-carbon economy and advance the United Nations sustainable development goals," said Rajah, citing two local mass transit train lines – Jurong Region and Cross Island - and shoring up the island state’s coastal areas threatened by rising sea levels as examples.
To qualify for sovereign green bond financing, a project must be classified as a nationally significant infrastructure under the Significant Infrastructure Government Loan Act (Singa) and be subjected to Singa’s gross borrowing and interest cost limits.
It must also meet the eligibility criteria of the new green bond framework in terms of the intended use of the bond proceeds and the commitment to post-issuance allocation and environmental impact reporting.
NEW FRAMEWORK SETS STANDARDS AND GOOD PRACTICES
Investment experts say the new framework is expected to set the standards for green bond issuance not only in Singapore but also regionally and unlock financing for environmental, social and governance (ESG) investments – a recurrent theme at the Ecosperity Week organised by Temasek Holdings.
“We think its biggest impact will be in establishing and cementing certain standards that could be replicated regionally. This will have a significant impact, especially if emulated by potentially large issuers in Southeast Asia or Asia more broadly,” Omar Slim, managing director and portfolio manager of fixed income at PineBridge Investments told AsianInvestor.
He expects major institutional investors such as state wealth funds and insurance funds from the region and globally to tap into the high-quality paper.
The new framework is also expected to deepen liquidity for green bonds in the region, said Jerome Tay, investment analyst, Asian fixed income at abrdn, adding that the bonds could attract a wide range of investors, including ESG investors, because of Singapore’s strong AAA credit rating.
Aside from boosting sovereign issuances, the new framework could also encourage corporate issuers to adopt the best practices and guidelines, further expanding the green bond market in Singapore, said Norbert Ling, ESG credit portfolio manager at Invesco.
“Importantly, it will help to ensure that there is sufficient capital to meet the needs of climate mitigation and adaptation in Singapore,” he added.