Singapore’s approach to ESG investing

We look at how Singapore is approaching them and how can ZEDRA support businesses and fund managers wanting to embrace this brave new world.

The latest Global Sustainable Investment Review reported that investments in sustainability-focused assets totalled USD $35.3tr globally in 2020, a 15% rise since 2018.

The US led the ESG march, with $17.1tr in US ESG-assets in 2020, up from $12trn in 2018. The next review due in late 2022 is expected to show an even greater increase as investors, particularly in the US and Europe, flocked to ESG funds during the pandemic.

The Financial Times has already noted how ESG inflows boomed in 2021. Global sustainable fund assets doubled to $3.9tr more assets in the six months ending September.

Singapore’s ESG initiatives and whole-of-nation approach

Regulations

Asia had been taking a somewhat cautious approach to imposing ESG regulations. For Singapore, things are evolving with both regulation and initiatives backing up the ESG message.

In 2016, the Singapore Exchange began asking listed companies to publish an annual sustainability report on a “comply or explain” basis. The sustainability reporting, which complements the financial reporting that companies were already doing, would enable a better assessment of companies’ financial prospects and quality of management when combined with existing reporting.

In 2020 the Monetary Authority of Singapore (MAS) released a set of guidelines around environmental risk management. The guidelines, which apply to asset managers, banks, and insurers, sets out MAS’ expectations on risk management practices to enhance these financial institutions’ resilience to and management of environment risk. The guidelines cover areas such as governance and strategy, research and portfolio construction, portfolio risk management and disclosure.

Fuelling sustainable investment and educating to achieve the Singapore Green Plan 2030

The Singapore government has gone on to back up legislation with initiatives including the Singapore Green Finance Centre October 2020 and the Green and Sustainability-Linked Loan Grant Scheme (GSLS). In August 2021, the National Environment Agency (NEA) announced the establishment of S$3 billion Multicurrency Medium Term Note (MTN) Programme and NEA’s Green Bond Framework.

Proceeds from the MTN Programme will be used to finance sustainable infrastructure development projects including NEA’s flagship waste management project in Tuas, Singapore. Such issuance of green bonds will not only help develop Singapore’s green finance markets and offer investors more investment choices, but is also part of the Green economy Pillar under the Singapore Green Plan 2030.

ESG Education and Advocacy

In April 2021, The Investment Management Association of Singapore (IMAS) launched its first ever ESG e-learning module on its online portal iLearn. As announced by IMAS, the module, titled “Sustainable Investing & MAS Guidelines on Environment Risk Management”, seeks to provide the asset management industry with introduction and insights in the area of sustainable investment, with case studies to facilitate application of MAS’s guidelines on environmental risk management.

The Stewardship Asia Centre, a non-profit centre established under Temasek, is “dedicated to helping business leaders, investors and individuals activate stewardship practice through executive education, research, engagement and advisory services.” With the aim to enable meaningful behavioural change towards responsible value creation, engagement program and stewardship principles are rolled out to provide guidance to investors and family businesses, and wider community.

These initiatives can be viewed as part of the city-state’s whole-nation approach, to advance the country’s agenda on sustainable development.

What’s next?

ESG investing will be driven further mainstream by the changing demographics of the affluent population.

Cap Gemini’s Top Trends in Wealth Management 2022 report found that more millennials and Gen Zs were becoming High-Net-Worth-Individuals (HNWIs) with implications for ESG themed investing.

Millennials are  bringing with them new ideals and beliefs which are influencing their investing habits with nearly 40% of HNWIs under the age of 40 are likely to request an ESG score for products offered by their firm.

Supply of suitable ESG products is an issue that may be resolved by regulation Samuel Rhee, chief investment officer for Singapore-based digital investment platform Endowus told EcoBusiness.com that a survey of over 1,100 Singaporean investors showed 93% of respondents wanted to invest in ESG but only 28% held any ESG investments.

Nearly 60% of those surveyed cited the possibility of greenwashing as a key concern in adopting ESG investment products.

Rhee said it was up to investors to read up on the companies that they invest in and that  demand would drive change. “The more investors demand accountability, and actively challenge advisors and companies, the more likely we’re able to impact ESG changes in corporations, as well as drive the broad adoption of global standards.”

How ZEDRA can help

We can help support businesses and fund managers in creating a tailored ESG reporting framework to support and further build their ESG strategies and responsible investment approaches.

In particular, we support businesses and fund managers with governance, compliance, and monitoring requirements.

Contact Kelvin Sng for a discussion on how ZEDRA can support you in your ESG journey.