Singapore offers up to S$2.4 billion of 50-year sovereign green bonds in inaugural offering
Of which, S$50 million will be offered to the public in Singapore through electronic applications.
SINGAPORE: Singapore will be offering between S$1.9 billion and S$2.4 billion of 50-year sovereign green bonds, according to a public notice put out by the Monetary Authority of Singapore (MAS) on Thursday (Aug 4).
Called the Green Singapore Government Securities (Infrastructure) or Green SGS (Infra), the bonds will be the country’s inaugural issuance of sovereign green debt.
With a maturity date of Aug 1, 2072, this is also the first time the Government is issuing 50-year bonds. Existing SGS bonds have maturities ranging from two to 30 years.
The price and yield of the bond will be determined via a bookbuilding process by the end of Thursday.
Up to S$2.35 billion is offered via a placement to institutional and other investors, while S$50 million will be set aside for retail investors in Singapore.
MAS, in its notice, said it reserves the right to decide on the final issuance amount and “may at its sole discretion” reallocate the aggregate principal amount of bonds offered between the placement and public offer.
The Green SGS (Infra) is part of the pipeline of up to S$35 billion of sovereign and public sector green bonds that the Government and its statutory boards will issue by 2030.
As part of the Singapore Green Bond framework published in June, proceeds from green bond issuances must adhere to guidelines and can be used for projects such as renewable energy, energy efficiency, preventing pollution and climate change adaptation.
Proceeds from the Green SGS (Infra) will be used to finance expenditures in support of the Singapore Green Plan 2030, including the Jurong Region Line and the Cross Island Line.
This is also the first time that MAS is issuing a bond via syndication, which involves the appointment of a group of banks – known as bookrunners – to jointly market and distribute a bond. In this case, the bookrunners appointed are DBS Bank, Deutsche Bank, HSBC, OCBC Bank and Standard Chartered Bank.
So far, SGS bonds have been issued via auctions.
The syndication method “enhances the Government’s ability to issue across varied market conditions”, MAS said in a media release earlier this week, citing how issuance parameters such as tenor and size are set on the day the bond is priced.
Following the publish of the public notice, the bond’s institutional bookbuilding will commence.
After the bond has been priced in the institutional market, MAS will announce the yield and price for the public offer for retail investors likely at the end of the day.
Retail investors will then be able to apply for the bonds via application channels, such as ATMs and online banking platforms, provided by DBS, OCBC and UOB, from 9am on Aug 5 to 12pm on Aug 10.
Key points to note for retail investors
- Retail investors applying for the bonds through the public offer must do so with a minimum of S$1,000 and in multiples of S$1,000.
- When applying via ATMs and online banking platforms, select the tab that says Electronic Securities/Initial Public Offering application, instead of SGS application.
- Each individual will only be able to submit one application. You will need an individual Central Depository (CDP) account and applications made using joint CDP accounts will be invalid.
- Apply in cash only. Retail investors will not be able to tap on monies in their Central Provident Fund or the Supplementary Retirement Scheme for applications.
- Each application comes with a non-refundable administrative fee of S$2.
- Allotment results will be announced on or about Aug 11. If your application is successful, the bonds will be credited to your CDP account in about two business days after the allotment date. If there are insufficient bonds to cover all valid applications under the public offer, the bonds will be allocated to as many individuals as possible, taking into account the distribution of valid applications. The balance of the amount paid on application will be refunded within 24 hours after allocation.
MAS urged individuals to “carefully consider” before making any investment decisions.
“Every investment bears risk and the bonds may not be suitable for all,” it said in an online guide for individual investors published on its website.
“You may incur a loss if the bonds are sold before maturity, as the bonds’ market price may rise or fall with changing market conditions.”
STRONG DEMAND TO COME FROM INSTITUTIONAL INVESTORS: EXPERTS
Industry experts are expecting “strong” interest for the Green SGS (Infra), referencing the healthy demand for sustainable debt issued thus far in the Asia-Pacific region.
More investors are incorporating environmental, social and governance (ESG) factors in their investment management strategies, while there is a rise in investment funds targeted at green bonds, said Mr Aloysius Fua who is partner and sustainable finance lead for ASEAN at Ernst & Young.
Among retail investors, more millennials want their investments to do good.
“Hence, this bond will likely be attractive to investors describing themselves as green or socially responsible,” he added.
Echoing that, Ms Cherine Fok, director of sustainability services at KPMG Singapore said investors are likely “to move fast on financing green projects” given the growing importance of climate-sensitive sectors such as alternative energy, infrastructure and transport.
But experts foresee higher demand to come from institutional, rather than retail investors, this time round.
Some “inhibiting factors” for the man on the street including having to put in a minimum sum of S$1,000 and investing in multiples of S$1,000, as well as the inability to tap on funds in one’s Supplementary Retirement Scheme or Central Provident Fund to purchase these bonds.
The Green SGS (Infra) is also not redeemable early, said Ms Fok, although she noted that the bond's long tenor is likely due to green financing being “a long-term structural concept" which will have to “persist through economic cycles”.
Apart from the bond’s long maturity date, uncertain market conditions at the moment may also put off some retail investors, said Mr Fua.
With this inaugural offering, Singapore joins countries including Hong Kong and South Korea in looking to raise funds for environmental projects.
Mr Fua noted that Asia-Pacific came in only behind Europe when it comes to the number of green bonds issued in 2021. Within the region, Singapore is one of the top three-largest country sources for such debt.
“This issuance will add on to the growth of the sustainability debt market in Singapore,” he said.
Ms Fok described the Green SGS (Infra) as reinforcing the country’s national agenda on sustainable development, as well as “a strong market signal of public sector leadership with collaboration on intergenerational private sector investment”.