Sustainability is one of the most pressing issues facing the world today and is ever more critical for Asia as the region houses five of the world's largest greenhouse gas emitters, accounting for 45% of global emissions.
At the same time, the fintech sector continues to grow and thrive, with Singapore as one of the primary global hubs in this space.
Optional to mandatory
Within the global transition towards standardised ESG disclosure, 29 countries maintain some degree of mandatory ESG reporting. Singapore is also considering mandatory climate reporting for listed companies by FY 2025 and large non-listed companies (NLCos) with S$1 billion ($739 million) revenue by FY 2027, following a public consultation initiated by the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo). The consultation period closed in September 2023 with SGX RegCo reviewing the consultation feedback by year-end.
“As many exchanges around the world are making climate-related disclosures mandatory for companies in their sustainability reports in key sectors, this sets the stage for making ESG reporting an essential practice for non-listed and listed firms in the near future,” Benjamin Soh, chair of the Green and Sustainable FinTech Subcommittee at the Singapore FinTech Association and managing director at Stacs told FinanceAsia.
Wanyi Wong, fintech leader at PwC Singapore, said to FA: “The changing sustainability landscape should encourage companies to educate themselves and keep up to speed on the various technology solutions – for example, carbon capture and storage, supply chain management, and more – which are available to help them on this journey, in the most efficient and effective way.”
“This [global transition towards mandatory ESG disclosures worldwide] also presents opportunities for businesses in terms of improving their reputation, de-risking their operations by identifying and addressing ESG risks early on, and attracting new investors and customers,” added Soh.
However, Soh noted intech platforms and digital solutions (are needed) which streamline the collection of data and empower ESG reporting aligned with global standards and frameworks. These can dramatically lower the barriers of entry and scale up the wider adoption of companies towards their sustainability journeys.”
Data remains crucial in supporting sustainability initiatives and judging the impact of any ESG effort. High-quality data is still hard to come by.
“Small, and medium enterprises (SMEs) can benefit from digitalised self-assessment tools that automatically calculate their Scope 1 and 2 carbon emissions footprints from basic data like fuel consumption and electricity consumption [which they will already have access to]. These data points should then be interoperable to be converted to be part of a bigger report, including the various global reporting standards should the SMEs grow further to require mandatory reporting,” added Soh.
Fintechs can enable enterprises to enhance their sustainability data capture by automating the collection process and ensuring real-time and accurate reporting. Utilising advanced analytics, they can help businesses comply with evolving ESG standards.
The resource challenge
Funding for ESG initiatives remains a major challenge and this is also where fintechs can help mobilise capital and deliver innovative financing methods, especially SMEs to get momentum for their initiatives.
“It is important for every company to assess ESG risk and manage its impact in this space. However, the availability of resources can be a challenge,” noted Wong.
Soh concurred, “Many businesses do not have the resources they need, especially in the case of SMEs to explore fintech solutions or greener practices. He sees the onus as being on solution providers: “Fintechs need to offer support to companies at varying levels of maturities, starting with the SMEs.”
Singapore's green initiatives
As fintech plays a key role in furthering the sustainability agenda, Singapore over the years has taken various initiatives to move these two forward in tandem. These include:
Financing for ESG initiatives: The Enterprise Financing Scheme, also called Green (EFS-Green), was launched in 2022 helping enterprises access green financing. At the end of 2022, the EFS-Green catalysed close to S$120 million of green loans for over 30 SMEs. The performance of this programme for 2023 will be released later this year by Enterprise Singapore.
To incentivise green finance, Singapore introduced the Sustainable Bond Grant Scheme (SBGS) in 2017. This was extended for another five years in April 2023. It supports brown-to-green transition projects in the region. In addition,the MAS this year set aside S$15 million for the sustainable bond and loan grant schemes to also include transition bonds and loans.
Singapore's public sector has pledged to issue S$35 billion worth of green bonds by 2030, supporting green infrastructure projects. These bonds so far are in four categories: clean transportation, waste management, green building and sustainable water. In the latest allocation, in September 2023, a total of S$700 million raised from the government's first sovereign green bond has been allocated to finance the upcoming Jurong Region Line (JRL) and the Cross Island Line (CRL) on Singapore's rail network. The remaining 70% of unallocated proceeds are expected to be fully allocated to the JRL and CRL by the end of FY 2024.
On the data governance front: In June 2023, MAS and SGX started collaborating with the Climate Data Steering Committee (CDSC) to strengthen global access to climate transition-related data. The CDSC-MAS-SGX collaboration aims to synergise across MAS Project Greenprint’s ESGenome disclosure portal and the CDSC’s Net-Zero Data Public Utility (NZDPU) global repository of climate transition-related data. Work on the collaboration will commence in the first quarter of 2024.
Also in June 2023 the United Nations Development Programme (UNDP), Global Legal Entity Identifier Foundation (GLEIF), and MAS embarked on a collaborative initiative, called Project Savannah, to develop digital ESG credentials for SMEs worldwide. This initiative aims to help simplify the ESG reporting process for SMEs. They are currently consulting regulators, financial institutions, and real economy corporations to refine the project’s scope and execution.
Singapore has also included the creation of a trusted data stream as one of five core objectives in its fintech development plan. The MAS is working with the financial industry on Project Greenpoint, which aims to streamline the collection, access, and use of climate and sustainability data.
Building and scaling for the future
Singapore's fintech sector, with its dynamic talent and innovation, is set to be a key hub to driving sustainability in Asia. By targeting underserved SMEs, Singapore's fintech ecosystem has a huge potential to play a leading role in the region’s sustainability journey.
There will undoubtedly be many discussions about this during Singapore FinTech Week.
