Issue of green bonds by govt will help develop sustainable financing capabilities

Singapore’s planned sale of up to S $ 35bn ($ 25bn) in ‘green bonds’ over the period to 2030 will help to develop the country’s sustainable financing capabilities, says Fitch Ratings.

This development will also be supported by the government’s moves to establish a green ‘taxonomy’, which among other goals seeks to allow financial providers to align their investments and lending on the basis of their environmental impact.

Singapore’s inaugural green sovereign bonds are likely to be issued in 2H2022. The impact on the sovereign’s credit profile is likely to be marginal, given its net creditor position and prudent fiscal management. The bonds are being issued under safeguards that include a gross borrowing limit and strict criteria for qualifying projects.

When Fitch affirmed Singapore’s rating at ‘AAA’ with a ‘Stable’ outlook in August 2021, the global credit rating agency emphasized that the rating reflects in part exceptionally strong external and fiscal balance sheets.

Climate change

The green-bond issuance highlights the government’s growing focus on long-term social challenges, such as sustainable development and combating climate change. The funds raised may be spent to promote fields such as adaption to climate change, biodiversity conservation and sustainable resource usage, renewable energy, energy efficiency, clean transportation, sustainable water management, pollution control, and green buildings.

Singapore’s housing ministry, the Housing & Development Board, raised S $ 1bn separately in March 2022 through its inaugural green bond program, dedicated to developing green buildings.

Such investment should support the government’s climate agenda, which includes a target for carbon emissions to reach net zero by or around 2050. This has also been the driver of other policies, such as government plans to raise carbon taxes from S $ 5 per tonne to S $ 25 in 2024-2025, S $ 45 in 2026-2027 and S $ 50-80 per tonne by 2030, which were highlighted in the 2022 Budget.

Regional capability

The green-bond issuance and carbon credits trading schemes are elements within the authorities’ plan for a broader green finance ecosystem. If successfully established, this could support the funding of sustainable finance initiatives both in Singapore and the broader region, while also enhancing the country’s existing strengths as a financial center.

A stronger sustainable financing ecosystem in Singapore would boost the country’s own capacity to invest in climate change-mitigation strategies, but the government’s capacity to finance these is already strong. The ecosystem’s role in raising funds for schemes elsewhere in the region could be even more important. A report by Bain & Company, Microsoft and Temasek Holdings estimated in 2021 that southeast Asia would need $ 2tn in infrastructure investment over the next decade to enable a sustainable transition and put the region on a path to net-zero greenhouse gas emissions.


The taxonomy initiative would support the development of this ecosystem by providing a classification scheme and enhancing disclosure. This would reduce ‘greenwashing’ risks, and provide investors with greater confidence that funds would be used efficiently and in line with their agenda. The taxonomy’s second draft, which is out for consultations, proposes a ‘traffic-light’ scheme for the three sectors most important for greenhouse gas emissions: energy, transport and real estate. Activities are categorized based on their impact with respect to climate-change mitigation.

The government aims to make the taxonomy scheme interoperable with those in other jurisdictions, such as the EU and ASEAN. Singapore’s green bonds issuance will be aligned with ASEAN’s taxonomy, but Fitch feels there may be challenges in developing a system that is fully interoperable with that of the EU. Consultations on the latest draft of Singapore’s taxonomy concluded on 23 June.


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