Will Singapore be the New Hub for Green Finance?

By Ophelia Jeffrey, Senior Account Executive, Financial Services

For years, ESG issues have steadily been building credibility within the global financial sector but until more recently, the conversation has been met with some scepticism across Asia. 

But with more consumers actively engaging with sustainability concerns, and central banks driving new regulatory frameworks, firms are now enthusiastically incorporating ESG considerations into their strategies. And in Singapore, this trend is magnified through its plans to establish itself as a leading market for green finance in Asia. 

Following Africa’s launch of the African Climate Risk Facility at COP27 to help the continent’s most vulnerable communities deal with climate disaster risks, there have been widespread calls for countries in Asia to follow suit – especially in the wake of the devastating floods that have left Pakistan with $30 billion worth of losses this year.  

And just last week, Singapore specifically moved to deepen its collaboration with the UK in a strengthening of the UK-Singapore Financial Partnership initially agreed in 2021, with sustainable finance priorities at the heart of discussions. 

The countries have agreed to explore collaboration opportunities with partners based in Singapore, such as the Glasgow Financial Alliance for Net Zero’s (GFANZ) Asia Pacific office with the aim of driving international consistency in design and disclosure of transition plans.   

And with the biodiversity COP starting this week, it’s encouraging to see the Monetary Authority of Singapore (MAS) driving forward action specifically related to natural capital, an often-overlooked twin to Net Zero initiatives. This is reflected in its new agreement to raise awareness of the potential for nature loss to generate financial risks through collaboration with partners such as the University of Cambridge Institute for Sustainability Leadership and the Singapore Green Finance Centre. 

However, there remains an important learning curve for firms in Singapore to consider. A report published last month titled Asia Funds: Navigating the ESG Maze by law firm Morrison Foerster underscores the need for greater transparency in the region when it comes to living up to new sustainability commitments. 

Almost seven in ten of the general partners surveyed for the report identified ESG criteria as influential when deciding whether or not to proceed with a potential investment. Yet less than half conducted the appropriate ESG due diligence on every investment, implying a lack of consistency between word and deed that must be challenged for Singapore to achieve its status as a hub for green finance. 

ESG and sustainability have rightly become significant considerations for firms operating in Singapore. A combination of rapidly changing consumer expectations, who want to use their purchasing power for good and are consequently demanding more from the businesses they work with, and growing pressure from regulatory bodies, is driving Singaporean firms to action.  

But in order to successfully lead from the front, Singaporean firms must be transparent about their business’ efforts. By choosing to embrace ESG issues and putting them front and centre of new business strategies, Singaporean firms have signed up to be scrutinised. And in order to thrive in this developing landscape, businesses in the region must reflect ESG values at their very core.