By Seah Rui Shan, Associate Essays Editor
Green Financing, the next trend in town towards a sustainable city.
It is awe-striking to think how Singapore has transformed into a world-class city-state within 54 years of nation building. Positioned as a financial centre and legal hub, Singapore has become the epicentre for investment and financial services. Equipped with expertise and resources, Singapore provides an extensive platform to facilitate projects for Asia’s infrastructure development, unlocking the region’s potential on the global scale. This essay posits that on top of playing a key role in creating an inclusive environment for infrastructure development in the region, Singapore can also serve as a green finance hub for Southeast Asia.
Singapore’s vibrant ecosystem
With a vibrant ecosystem for sourcing capital and a reputable hub for trade and investment, Singapore is an attractive location for international organisations to conduct their businesses. While many government-backed corporations, like the Government of Singapore Investment Corporation (GIC), have been the main driver behind the project pipelines that shapes Singapore’s strategic interest, Singapore’s reputation as an investment hub [1] has gained traction by investors over the years. Being increasingly diversified by the presence of many multilateral development banks and international organisations such as the Asia-Pacific Economic Forum significantly contributes to the vibrancy of Singapore’s infrastructure ecosystem.
Beyond engaging in infrastructural projects on its shores, Singapore has also begun providing services and expertise that facilitate infrastructure opportunities in Asia. In addition, Singapore has also been actively growing its pool of infrastructure fund managers and institutional investors who are keen on Asia-Pacific’s infrastructure investment opportunities. [2] These players include insurance companies specialising in political, credit and energy risk, help stakeholders to manage their risk. Hence, Singapore as an economically stable setting, particularly in the turbulent climate of the global economy further asserts itself as a dynamic seamless platform gathering local and international partners across the value chain. More than promoting informational exchange, Singapore offers a reliable and neutral venue in the case of dispute resolution, offering parties a full suite of dispute resolution services and boasts as an international centre for debt restructuring. [3]
A stepping stone for greater infrastructural development in Southeast Asia
The lack of good quality infrastructure has been a longstanding developmental challenge in Asia. Infrastructural needs are not only critical for economic growth but for the improvement of people’s quality of life, spurring governments to inject more capital for the financing of infrastructure. Additionally, Southeast Asia is currently facing an infrastructure gap of US$102 billion. [4] As such, Singapore can tap on its vibrant capital ecosystem and play a part as the centre of connectivity for greater regional collaboration. This can be carried out by facilitating greater public-private partnerships in the region. The provision of foreign capital and mobilisation of resources can aid governments in overcoming resource constraints and improve delivery.
Evidently, the infrastructural opportunities coupled with its strength of attracting an extensive international network capital makes Singapore a key player in unlocking Southeast Asia’s developmental potential.
Green Financing
What is Green Financing? Green Finance encompasses initiatives taken by private and public players (businesses, banks etc.) in developing, implementing and promoting projects with sustainable impacts through financial instruments with the goal of achieving sustainable development. An example of a Green Finance projects is the promotion of renewable energies. [5]
Green Financing and the role of Singapore
While Singapore has a stake in capturing infrastructure growth opportunities in the region, it must aim to offer more sustainable financing and infrastructure solutions so that they can value-add to the region and offer Green Financing as an additional expertise which can better serve the needs of Southeast Asia and the region. On top of adopting innovative finance schemes as an evolving financial hub, Green Finance is a necessary step in the effort to curb global environmental challenges. As the Southeast Asia region has been experiencing exponential economic growth, it has come at great environmental expense which makes this a vital problem. This heightens the need for Green Financing as an effective means of directing investment capital towards climate mitigation, financing low-carbon transition and adaptation projects.
What can Singapore do?
Singapore can expand its capital ecosystem, instituting conducive conditions for information sharing of best practices with global leaders and experts in Green Financing. Connecting financial and corporate sectors together with policymakers and research experts from Singapore and the region will encourage the exchange of ideas, sparking the developments of green finance regionally. Such platforms enable green finance practitioners to spearhead its development of the market. Singapore can further facilitate this process by promoting the flow of capital towards projects addressing environmental and climate concerns by capitalising on regional developments such as furthering developments in the green bond market with the green bond grant scheme which provides a 100% reimbursement of additional costs of obtaining an external review of a green bond. [6]
The role of infrastructure is critical in the era of globalisation and urbanisation today. While Singapore has a strong ecosystem of infrastructure development, it needs to tap on opportunities regionally and globally to propel itself even further. To be future-ready, creating an inclusive environment centred around sustainable infrastructure development, specifically Green Finance, is the next step forward in opening up opportunities for both Singapore and Southeast Asia.
References
[1] “Singapore to Face More Competition as Investment Hub as South-East Asia Deal Value Doubles to US$70b over next 5 Years: Report.” The Straits Times, November 19, 2018. https://www.straitstimes.com/business/banking/more-competition-for-singapore-as-investment-hub-as-south-east-asia-deal-value.
[2] “Learn More about Singapore's Comprehensive Infrastructure Ecosystem.” Learn more about Singapore's comprehensive infrastructure ecosystem | Infrastructure Asia. Accessed September 19, 2019. https://www.infrastructureasia.org/en/Our-Network.
[3] Learn More about Singapore's Comprehensive Infrastructure Ecosystem.” Learn more about Singapore's comprehensive infrastructure ecosystem | Infrastructure Asia. Accessed September 19, 2019. https://www.infrastructureasia.org/en/Our-Network.
[4] Ariffin, Eijas. “Financing ASEAN's Infrastructure Demand.” The ASEAN Post, July 15, 2018. https://theaseanpost.com/article/financing-aseans-infrastructure-demand.
[5] “Export Impact For Good.” ITC. Accessed September 19, 2019. http://www.intracen.org/What-is-green-finance/.
[6] “ASEAN Green Finance State of the Market.” Climate Bonds Initiative. Accessed September 20, 2019. https://www.climatebonds.net/files/files/ASEAN_GreenFin_SotM_CBI_012019.pdf.
About the author: Rui Shan is a Year 2 Political Science undergraduate at the National University of Singapore. Her research interests include the rise of emerging markets in the political economy and East Asia developments.
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