A financial industry taskforce convened by the Monetary Authority of Singapore (MAS) has launched several initiatives to accelerate green finance in Singapore on May 19.

One such initiative is the issuance of a detailed implementation guide by the Green finance Industry Taskforce (GFIT) for climate-related disclosures by financial institutions.

The guide sets out best practices that're aligned with the recommendations of the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD). It also outlines specific disclosure practices for each of the banking, insurance and asset management sectors.

The GFIT has also set out a framework to help banks assess eligible green trade finance transactions, as well as a whitepaper on scaling green finance in sectors including real estate and fund management.

The framework provides a principles-based approach for banks to assess eligible green trade finance transactions and specific guide on recommended industry certifications for trade finance activities to qualify as green.

Based on the framework, HSBC and UOB have piloted four green trade finance transactions for renewable energy, recycling, agriculture and farming activities, to support businesses in greening their supply chains.

HSBC Singapore has already piloted two transactions under the framework, while UOB says the facilities will help two of its clients in Singapore’s food supply chain build on their sustainability initiatives and strengthen their supply chain resilience.

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The whitepaper, which outlines recommendations and lays out a road map to scale green finance in the abovementioned sectors, includes a green securitisation platform to scale sustainable infrastructure investments in the region. It also includes recommendations for the use of transition bonds and loans in the shipping, oil and gas, as well as automotive sectors to support more sustainable practices.

In addition, GFIT will launch a series of workshops and e-learning modules for financial institutions (FIs) and corporates to build capacity in green finance such as enhancing environment-related disclosures and customising green financing solutions for transition sectors. The workshops and e-learning modules will take place from May to April 2022.

Gillian Tan, assistant managing director (development and international) at MAS, says, “GFIT’s initiatives to enhance climate-related disclosures and strengthen green capabilities will enable financial institutions to effectively develop green solutions and align their portfolios towards facilitating Asia’s transition to a low carbon economy.”

“These initiatives will also contribute to global efforts to achieve greater consistency and comparability in climate-related disclosures, as well as provide investors and market participants with the necessary information for climate risk analysis and investment decision-making,” Tan adds.

“Climate change requires all areas of society to do their part. The Green & Sustainable Trade Finance and Working Capital (GTF) Framework sets in motion a move towards a clear, unified methodology to qualify trades and working capital loans as sustainable, and represents a tangible blueprint for financial institutions to assess, monitor and report on how ‘green’ a company’s activities are. We believe that the GTF is a great step in the right direction on our journey to address climate change,” says Iain Morrison, head of global trade & receivables finance (GTRF) at HSBC Singapore.

“Companies that qualify for a green trade financing facility have taken steps to mitigate their environmental, social and governance risks such as identifying suppliers with good overall management practices and building more resilient supply chains. They are also at the forefront of an industry megatrend. There is more than $1 trillion worth of trade that flows through Singapore, of which more than $90 billion meets the requirements of being green and sustainable. These trade flows provide an immense opportunity for us to work with companies to offer green trade financing and to support their trade flows through our regional network capabilities,” says Frederick Chin, head of group wholesale banking and markets at UOB.

“While we are seeing growing appetite for ESG investments in the region, there are still significant barriers to adoption, particularly on the data front. ESG evaluation, unlike traditional financial analysis, doesn’t have a long history; a standard, established and transparent methodology; or sufficient disclosure of information. To make matters even more nebulous, firms that choose to disclose their ESG metrics can do so strategically as they disclose what they want and self-report, allowing them to put their best foot forward. Or, worse case, by greenwashing the reality of their sustainability efforts,” says Ashish Rai, group managing director, APAC and MEA, Capital Markets at FIS.

“This is why MAS’ efforts to develop and harmonize taxonomies and, as recently announced, set out guidelines on climate-related disclosures is significant. Improving the consistency and transparency of ESG reporting and disclosure is essential, especially as Singapore positions to be the leading green finance hub in the region. This is also where technology can help to drive green finance forward. Modernized platforms embedded with enhanced data analysis and AI capabilities can help to improve the quality, accuracy and availability of ESG data, which will in turn inform decision making and identify hidden risks and opportunities. Apart from regulators and financial institutions, fintechs are in a unique position to help build a strong foundation for green finance as it moves into the mainstream in Singapore,” Rai adds.

MAS taskforce issues guide for climate-related disclosures and framework for green trade finance

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