S’pore wants to grow green bond market, MAS to introduce grant

SINGAPORE — The Monetary Authority of Singapore (MAS) will promote the development of a wider range of sustainability-oriented benchmarks, funds and products, starting with green bonds, Minister of National Development and Second Minister for Finance Lawrence Wong said on Thursday (March 23).

Green bonds are fixed-income securities that raise capital for use in projects or activities with environmental benefits, such as those to cut greenhouse gas emissions.

“The global green bond market has grown rapidly over the years, reaching more than US$80 billion (S$112 billion) in 2016. In Asia, the green bond market has also started to take off. In Singapore, we have a broad community of asset managers and institutional investors on the buy-side, and banks with strong debt-origination capabilities on the sell-side,” Mr Wong said at the Investment Management Association of Singapore’s 20th anniversary conference.

“So, this puts us in a strong position to support the development of a green bond market. The presence of a green bond market here will add to the breadth and depth of Singapore’s debt market, providing buy-side participants with more investment opportunities, and supporting the growth of ancillary services as well,” he added.

Mr Wong said the MAS recognises that issuers of green bonds may have to bear additional costs, as they engage external reviewers to ascertain the status of the instruments. To kick-start the development of a green bond market in Singapore, MAS will introduce a Green Bond Grant scheme this year to incentivise the issuance of such instruments, he added. Under the scheme, qualifying issuances can offset 100 per cent of expenses attributable to obtaining an external review for green bonds, up to a cap of S$100,000 per issuance.

“Green finance is a rapidly growing field, spurred on by consensus that more needs to be done to combat climate change. Encouraging more issuers to tap into the green bond market should help kick start interest in this asset class and foster the growth of green bonds’ issuance in Singapore. For investors, green bonds offer diversification and the opportunity to play a part in promoting sustainability,” said Mr Tony Lewis, head of HSBC Securities Services, Singapore.

Mr Wong also announced on Thursday the launch of a public consultation by the MAS to gather feedback on a new corporate structure called the Singapore Variable Capital Company (S-VACC). S-VACC will complement existing corporate structures for investment funds and allow asset managers to further consolidate their operations in Singapore by domiciling more of their funds here, alongside their fund management activities.

“(This) will spur demand for fund-servicing activities such as accounting, legal, custody and tax in Singapore, therefore creating more jobs in the broader professional services sector,” he said.

The new corporate structure will provide greater flexibility and cost efficiency to asset managers by allowing for both open-ended and close-ended fund structures, he added. It also allows for investments across all asset classes, and may be used by both retail and private funds.

“This is a positive for Singapore in the long run. As more funds are domiciled here, it will encourage the further development and expansion of the funds services sector including fund administrators and custodians operating in Singapore. It will also strengthen the local talent pool to support the long-term development of Singapore across the asset management and fund servicing sector,” Mr Lewis said.