Private capital has big chance to meet need for “green” investment

More clarity needed in standards of debt instruments, says MAS executive

Private capital has a huge opportunity to help meet the region's soaring demand for "green" investment over the next decade or so, said a Monetary Authority of Singapore (MAS) executive yesterday.

Mr Ng Yao Loong told the Green Bonds Asia Conference here that an estimated US$200 billion (S$270 billion) of investment will be needed between 2016 and 2030 - a five-fold increase from current levels.

But while the demand is evident, more clarity is needed in the standards of debt instruments - called green bonds - to boost investor confidence, added Mr Ng, the MAS' assistant managing director, development and international group.

He noted: "Investors need clarity on and confidence in the standards that green bond issuers are adopting."

Singapore's existing green bond grant scheme applies international standards while the Asean Green Bond Standards have been aligned with the principles of the International Capital Market Association.

Mr Ng said: "Doing so provides a single Asean standard to promote the development of a regional green bond market while mitigating the risk of diverging from the standards to which international issuers and investors are accustomed."

He said if the share of private financing in Asean is assumed to rise from the current 25 per cent level to more than 50 per cent of total green financing needs, the amount has to increase by more than 10 times today's level.


This means private sector players, including investors or issuers, must build up expertise for the green finance market to grow, added Mr Ng.

The green bond market started a decade ago and reached US$156 billion last year. Asia contributes about a quarter of global green bond issuances annually, driven by the hive of activity out of China.

It was recently dethroned as the world's largest green bond issuer by the US, reflecting the impact from a US$25 billion mortgage-backed green securities issue by Fannie Mae, an S&P report earlier this year showed.

There have been signs of institutional demand for such an asset class in Singapore.

Mr Ng cited the 19.5 billion rupee (S$386 million) bond deal issued by the Indian Renewable Energy Development Agency that was listed on the Singapore Exchange (SGX).

In November 2017, Manulife Financial Corp issued and listed a $500 million green bond on the SGX, and in April this year, Indonesia's Star Energy Geothermal issued and listed a US$580 million amortising green project bond.

The MAS and International Finance Corporation, a sister organisation of the World Bank and organiser of yesterday's conference, will collaborate on spurring green bond issuances by financiers in Asia.

An memorandum of understanding outlining the issue was signed yesterday.

The two agencies plan to promote globally recognised green bond standards and raise awareness among finance professionals on green finance issues.