Bankers are looking towards statutory boards for the issuance of green bonds to spur the growth of an S$6 billion market in Singapore.
Singapore's green bond market can be a new area of growth for bankers. Valued at more than S$6 billion today, the pie reflects a good mix of both local and foreign issuers, according to Monetary Authority of Singapore's (MAS) 2019 corporate debt market development report released in October.
«As an Asian centre for capital raising and enterprise financing, Singapore can serve the growing need for the financing of investments to support Asia's transition towards a low-carbon and climate resilient model,» the report said.
Stat Boards
The fact that statutory boards here are well-funded by government bonds could be one reason why the Republic has yet to see issuances by the boards, said DBS Head of fixed income Clifford Lee, who was quoted in a Business Times report.
However, there is a higher tendency for the government to spend on green initiatives, especially in housing and public transport. This makes it «very possible» for statutory boards to issue green bonds in the near future, said Lee.
Differentiation With Sustainability Bonds
Green bond proceeds are predominantly used to finance or refinance climate and environmental projects. Sustainability bonds, however, are a mixture of green and social bonds and are used to fund both environmental-related and social projects.
Issuing green bonds in areas like transport and housing can be key to driving Singapore's green bonds market, experts note. Outside of Singapore, statutory boards are already tapping those spaces for green and social bond issuances.
«Tapping the capital markets by encouraging the issuance of long-tenor sovereign green or sustainability bonds is certainly an effective way to fund these long-term infrastructure investments,» said Rahul Sheth, head of sustainable bonds and capital markets at Standard Chartered Bank.
Stringent Regulations
While research shows that the green bond market is poised for growth, issuing green bonds does not create green projects. This is due to stringent regulations when classifying green projects, which limits the market for green investments, explained Lee.
Meanwhile, transportation took the biggest slice of the cake in the global statutory board sustainability bond market this year, making up 39 percent as of September 2019, based on data compiled by Bloomberg. Infrastructure and housing took up some 18 percent.
