Singapore introduces framework for sovereign green bonds ahead of inaugural issuance

SINGAPORE: Singapore on Thursday (Jun 9) published the governance framework for sovereign green bonds, ahead of the first such issuance expected in the next few months.

This comes as Singapore moves to develop the green finance market and make green finance a driving force for sustainability.

The Singapore Green Bond Framework sets out guidelines for public sector green bond issuances under the Significant Infrastructure Government Loan Act 2021 (SINGA), said the Ministry of Finance (MOF) and the Monetary Authority of Singapore (MAS) in a media release.

It covers the Government’s intended use of green bond proceeds, governance structure to evaluate and select eligible projects, operational approach to manage green bond proceeds, and commitment to post-issuance allocation and impact reporting.

In addition to providing the foundation for green bonds issued by the Government, the framework will also serve as a reference for statutory boards that issue their own green bonds.

The key principles considered in the development of the framework were alignment with internationally recognised market principles and standards; stringent governance and oversight of project selection and allocation of proceeds; and technical screening to evaluate and identify green projects, MOF and MAS said.

ELIGIBLE EXPENDITURES

At Budget 2022, Finance Minister Lawrence Wong announced that the Government would issue S$35 billion of green bonds by 2030 to fund public sector green infrastructure projects.

Proceeds from these bonds, which will be issued under the new framework, will be used to finance costs associated with the Singapore Green Plan 2030, MOF and MAS said.

In turn, the eligible green projects are expected to facilitate the transition to a low-carbon economy in Singapore and contribute to the climate-related and environmental goals set out by the Singapore Government.

The categories of “eligible green expenditures” are: 

• Renewable energy
• Energy efficiency
• Green building
• Clean transportation
• Sustainable water and wastewater management
• Pollution prevention, control and circular economy
• Climate change adaptation
• Biodiversity conservation and sustainable management of natural resources and land use

"IMPORTANT STEP FORWARD"

At the Singapore Sustainable Investing and Financing Conference on Thursday, Minister in the Prime Minister’s Office Indranee Rajah spoke of the urgent need for sustainable financing in the battle against climate change.

“The task to accelerate sustainable finance to create and enable green solutions is critical. By some estimates, US$2 trillion in infrastructure investments will be needed over the next decade in Southeast Asia alone to enable the sustainable transition and put the region on the path to net zero,” said Ms Indranee, who is also the Second Minister for Finance and National Development.

“The transition may seem daunting, but we are determined to secure a brighter and greener future for ourselves and the generations that are yet to come.

“The sustainability movement will bring about new areas of growth opportunities for each country, for Asia and for the world at large – in green technologies, in sustainable finance and in carbon services and trading.”

Ms Indranee said that public sector green bond issuances are a key part of Singapore’s overall sustainability agenda, and the introduction of the Singapore Green Bond Framework is a significant step towards the country achieving its green goals. 

“Through these high-quality issuances, we hope to deepen market liquidity for green bonds, attract green issuers, capital and investors, and catalyse sustainable financing in the region,” she said.

“We are committed as one Government to taking bold and decisive actions to tackle climate change, finance sustainable infrastructure and catalyse the green economy.

“The publication of our Singapore Green Bond Framework is yet another important step forward in this regard.”

INAUGURAL ISSUANCE

The Government will issue its first sovereign green bond under the SINGA, known as Green SGS (Infrastructure) bonds, in the coming months, MOF and MAS said.

"These bonds will be used to finance nationally significant infrastructure which meet the green criteria under the framework," they said.

"Such infrastructure projects are expected to provide long-term environmental benefits to both the current and future generations."

Under the SINGA, infrastructure projects that qualify as "nationally significant" should be controlled and legally owned by the Government, cost at least S$4 billion and have a useful life of at least 50 years.

They will also "support or materially improve national productivity or Singapore’s economic, environmental or social sustainability".

"The Monetary Authority of Singapore will undertake the issuance and management of SGS on behalf of the Government," MOF and MAS said.

"The MAS will provide more details about the upcoming issuance of the Green SGS (Infrastructure) bond closer to its issuance date."