The Monetary Authority of Singapore (MAS) is considering doling out more green financing incentives for financial services companies to "nudge" the real economy towards becoming more green.
In greening the financial system, there are threats as certain assets anchored in the old world of heavy fossil-fuel dependency will be rendered less valuable. Climate change may physically further hurt these assets. Areas that can be promoted include green funds, loans, insurance and risk-transfer solutions.
"The economy of the future has to be greener, which means the financial sector has to be greener than before and be in a position to support that kind of activity," MAS managing director Ravi Menon said in an interview with Bloomberg in Singapore.
The economy of the future has to be greener, which means the financial sector has to be greener than before"
"If you look at the full range of financial services then the challenge is to ask ourselves: have we applied our minds to make each of these services and offerings conducive to creating a more green economy that has lower carbon footprint?"
South-east Asian nations are some of the most vulnerable to climate change and are estimated to need $200bn in green investments each year to 2030. Singapore issuers have so far sold about $6bn worth of green bonds, a small portion of Singapore's $96bn corporate bond market, according to data from MAS.
"There is a growing recognition that climate-related risks are going to be a more important consideration, going forward. So we need to build up financial institutions' capabilities to manage climate-related risks," Menon added in another interview with The Business Times.
"Green bonds are really a no-brainer," Menon said. "But we need to think much further about how we can come up with innovative solutions that make it easier for businesses to invest in greener technologies."
The local finance sector has been moving towards greener options. Oversea-Chinese Banking Corp wants to build a sustainable finance portfolio of $10bn by 2022, while United Overseas Bank said it would halt funding for new coal-fired power plants. South-east Asia's biggest lender DBS has been extending sustainability-linked loans to borrowers such as CapitaLand.