Singapore introduces framework for inaugural sovereign green bond

More Asian sovereign issuers are lining up green bonds to address post-pandemic financing gaps. Singapore is gearing up for its first green note launch in the coming months, to tap markets for as much as S$35 billion in environment-focused financing by 2030.

As a low-lying island city state with one-third of its land less than 5 metres above sea level, Singapore needs to invest in protecting its coastline. The Republic is exploring the use of green bonds for climate change adaptation. Image: Christian Chen / Unsplash

Singapore set out guidelines on Thursday for its first sovereign green bond offering, laying the foundation for the nation’s first such bond to be issued in the coming months. It plans to tap the markets for as much as S$35 billion (US$25.4 billion) by 2030. 

Beyond transport infrastructure projects, the city-state will also explore the use of green bonds for the financing of climate change adaptation, including coastal protection, said its second minister of finance Indranee Rajah, who will be chairing a steering committee tasked with approving eligible projects. 

Indranee, who is also minister in the Prime Minister’s Office, said that the framework, aligned with current principles of the International Capital Market Association (ICMA) and Asean green bond standards, outlines the Singapore government’s ambition and commitment to high quality issuances for its public sector green bonds. 

“The framework will also serve as a benchmark for the corporate bond market,” said Indranee at the Singapore Sustainable Investing and Financing Conference, held as part of Ecosperity Week. 

“Singapore hopes to deepen market liquidity for green bonds, attract green issuance, capital and investors, and catalyse sustainable financing in the region.” 

Singapore’s finance minister Lawrence Wong, who will soon assume office as deputy prime minister, had announced the borrowing plan in his February budget speech to support the city-state’s transition to a low-carbon economy and boost its development as a environmental finance hub. 

The programme will include bonds issued by the Singapore government and its statutory boards to finance nationally significant green infrastructure projects in the public sector, the ministry of finance said in a statement. 

Proceeds from the bond sales will be spent on areas including renewable energy, energy efficiency, green buildings, clean transportation, sustainable water and wastewater management, according to the statement. 

Two of Singapore’s statutory boards — the National Environment Agency (NEA) and the Housing & Development Board (HDB), which manages the country’s public housing projects — have already published their own green bond frameworks. NEA’s green bond proceeds will be used for infrastructure projects, including the Tuas Nexus Integrated Waste Management Facility, a massive new waste incinerator and water purification plant that has been labelled as “sustainable”. The proceeds from HDB’s green finance deals will be used to finance or refinance green building projects, said the statement. 

Sustainable bond issuance soars in Asia

Green bonds are fixed-income instruments designed to finance projects that have been specifically earmarked as climate or environment-related. In February, a report from American financial services company Moody’s said that conditions are ripe for increased issuance of sustainable bonds by sovereign states in Asia-Pacific. Investor demand is also rising for instruments that cater to the sustainable market, said the report. 

The region sold $185.22 billion of green debt in 2021, a 117 per cent increase from 2020, according to Climate Bonds Initiative, a green debt tracker based in the United Kingdom. Market intelligence data shows that green bond issuances from China, now the world’s second-biggest green bond market after the United States, is set to cross the $100 billion mark this year. 

In her address, Indranee said that there is huge potential to unlock more financing into marginally bankable but worthy sustainable projects through blended finance platforms, and Singapore is moving to develop the green finance market.

The Republic is now the largest sustainable finance market in Southeast Asia, accounting for about half of sustainable debt issuances cumulatively. 

Singapore will issue its inaugural sovereign green bond under the Significant Infrastructure Government Loan 2021, or Singa. Various public agencies will suggest green projects, which the ministry of finance will curate. 

The new framework has been reviewed by Morningstar Sustainalytics, an independent environmental, social and governance research firm. 

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