Financing a Green and Inclusive Recovery

Financing a Green and Inclusive Recovery

By Zenia Chang

How can we build back better?

Plagued by the COVID-19 pandemic, Singapore’s economy shrank by 5.4 per cent in 2020 – the first annual contraction since 2001 and the worst recession since independence in 1965.[1] Uncertainty has arisen from COVID-19 and climate risks, but governments and corporations alike are committed to building back better sustainably and resiliently.

Sustainable finance will underpin our recovery, through investments in technology, innovation, and research for climate and sustainability solutions.


Sustainable finance, explained

But what is sustainable finance? Sustainable finance refers to schemes and initiatives that have the common goal of providing or facilitating capital for climate and sustainability solutions. Sustainable debt in a green market is issued in several instrument types:

Green Bond Proceeds* used to finance projects and activities that benefit the environment.
Green Loan


Any type of loan instrument made available exclusively to finance or re-finance, in whole or in part, new and/or existing eligible green projects.
Sustainability Bond Proceeds are exclusively used to finance projects that bring clear environmental and social-economic benefits.
Sustainability-Linked Bond


Bonds** in which issuers are committing explicitly (including in the bond documentation) to future improvements in sustainability outcomes within a predefined timeline; proceeds are intended to be used for general purposes, as compared to sustainability bonds.
Sustainability-Linked Loan Loan with a mechanism linking discounts or premiums applied to interest rates to a borrower’s ESG rating or other sustainability metrics.[2]
Social Bond


Proceeds used to finance projects achieving positive socio-economic outcomes for an identified target population, with a neutral or positive impact on the environment.

*Proceeds refer to the cash received from the sale of a good or product.
**Bonds refer to units of corporate debt issued by companies and securitised as tradeable assets.


Sustainable finance is an urgently needed solution

If no mitigating actions to combat climate change are taken, the IPCC (Intergovernmental Panel on Climate Change) projects that the world’s temperature will increase by 2 to 3.2 degrees Celsius mid-century.[3] In the worst-case scenario of temperatures rising by 3.2 degrees, Swiss Re forecast global GDP could fall by 18 per cent,[4] and that countries in Southeast Asia will be most negatively affected, as they would be the least equipped to mitigate climate change effects. Singapore is the exception[5], emerging amidst rapid growth in the Asia-Pacific region as a leader in climate resiliency and well-positioned to help the region achieve more sustainable growth.

Yet, even in Singapore, COVID-19 highlighted the disparity between the rich and the most vulnerable communities. Both the public and private sectors in Singapore have committed to pathways towards inclusive, sustainable development and decarbonisation as a means of recovery and climate change action. One such pathway is sustainable finance.

“Green finance is a natural solution to inequality.”

Sopnendu Mohanty, Chief Fintech Officer at the Monetary Authority of Singapore

Policymakers are increasingly recognising the value of green finance in public issues, from solving inequality to the creation of opportunities for small and medium enterprises (SMEs). During SGInnovate’s webinar, hosted together with the Embassy of Switzerland on 27th April, Mr Sopnendu Mohanty, Chief Fintech Officer at the Monetary Authority of Singapore, stated that green finance is a natural solution to inequality. According to Mr Mohanty, for developing countries seeking to transition to a low-carbon and sustainable economies, financial hubs like Singapore and Switzerland are primed to facilitate this wave of change. He underscored that Singapore is positioned to provide direct capital particularly to ASEAN countries for affordable sustainable solutions.

Adding on, Christoph Baumann, the Deputy Head of Insurance and Risks at the Swiss State Secretariat for International Finance, shared that Switzerland focuses on three pillars in its approach to sustainable finance: carbon pricing, transparency, and green FinTech. Baumann believes that “the climate transition leads to opportunities and can have great benefits for small and medium enterprises. We need to promote an ecosystem in which small companies (that innovate) can thrive.”


Sustainable finance is gaining momentum

Despite or perhaps in response to the COVID-19 pandemic, sustainable debt issuance broke annual records and totalled US$732 billion in 2020, with a significant increase in social and sustainability bonds (see the following figure).

Global Sustainable Debt Annual Issuance, 2013-2020

Global sustainable debt annual issuance 2013-2020

Source: BloombergNEF, Bloomberg L.P.

Moreover, it has just been ascertained that the first quarter of 2021 saw a record USD$231 billion in green, social and sustainability bonds – three times than the first quarter of 2020. In particular, social bond volume hit a new high, following the trend and focus on the social aspect of recovery. According to Moody’s Investors Service, “social bonds will remain a fixture of the sustainable finance space over the long term as governments and companies increasingly focus on a broader array of social issues.”[6]

Social bond volume hits new high on pandemic response efforts

In Singapore, the government and private companies have shown leadership in sustainable finance, visible through public policy commitments[7] and business strategies.


Singapore’s public policies now encourage sustainable finance

Earlier this year, the Singapore government revealed its 2030 Green Plan with ambitious targets in all aspects: creating a city in nature, an energy reset, sustainable living, a green economy, and a resilient future.[8] Singapore’s vision for a green economy includes:

  • An Enterprise Sustainability Programme, which helps enterprises – especially small and medium-sized enterprises, the most significant contributors to Singapore’s GDP – embrace sustainability and build resiliency capacity.
  • Business and job opportunities in Green Finance, verification, credits trading, and risk management.
  • Becoming the leading centre for Green Finance in Asia and globally by fostering the development of green financial solutions and leveraging innovation and technology.
  • The Research, Innovation and Enterprise Plan 2025, which will promote homegrown innovation and attract companies to anchor their research and development activities in Singapore to develop new sustainability solutions.

The 2030 Green Plan builds upon Prime Minister (PM) Lee Hsien Loong’s remarks that Singapore may be small and lack natural resources, but can push forward with tech and policy solutions towards sustainable progress, including the development of a green economy.

At the Leaders’ Summit on Climate in April, PM Lee elaborated on this sentiment, stating, “This (the green investments programme) will support the development of carbon trading and services, sustainability consultancies and environmental risk management. One promising area is emissions verification, including the use of new technology to measure the carbon footprint as well as monitor the abatement commitments businesses have made.”

Another significant policy initiative is the MAS Sustainable Bond Grant Scheme, already proven successful in uptake,  which encourages the issuance of green, social, and sustainability-linked bonds. MAS believes that these green bond issuances can allow companies to meet environmental, social, and governance objectives, diversify their investor base and achieve long-term pricing advantage. MAS also started work on Project Greenprint: FinTech for an Inclusive Society and a Sustainable Planet. Mr Mohanty, during the SGInnovate webinar, said the projects aims to create a marketplace where SMEs can find investors, seek advice, and analyse and monitor their sustainability targets.


More opportunities for sustainable solutions in the private sector

This past April, Temasek and BlackRock jointly committed US$600 million to invest in firms with carbon emission-reducing products and technologies such as emerging fuel sources, grid solutions, battery storage, and electric and autonomous vehicles. The partnership, called “Decarbonization Partners,” also has a fundraising target of US$1 billion for its first fund and will raise third-party capital.

With the intention of helping to “define climate solutions as a standalone asset class”, Decarbonization Partners is part of an accelerating recognition that the finance industry stands to gain from sustainable investments.

According to the Asian Development Bank’s (ADB) 2021 report, incentives for the finance industry to channel capital into environmental and social impact investments include better stock performance and pandemic resilience, amongst others:

During a 16-day period encompassing the announcement of green bond issuance, issuing firms’ common stocks post an average cumulative abnormal return of 0.5%, or an annualised gain of 7.9%. Such positive reaction indicates that investors see green and social finance creating value. Recent evidence from global markets shows firms distinguished by their green bond issuance enjoying superior stock price performance and greater resilience during the pandemic. Further, such positive investor recognition helps to broaden the investor base for green and social investment.

Furthermore, green bonds may even enjoy a cost advantage over bank loans:

In 2020, Alonso-Conde and Rojo-Suárez conducted an evaluation of financing with green bonds versus conventional bank loans: investments financed by green bonds earned higher internal rates of return for shareholders. Higher return was driven by the lower financing costs of green bonds relative to bank loans.

With the finance industry pivoting towards sustainable investments, there are more opportunities than ever for companies to hedge and mitigate sustainability risks, stay aligned with changing stakeholder preferences and social norms, and foster greater resilience to market shocks –  such as the COVID-19 pandemic.


Paia Consulting can help clients capture opportunities in sustainable finance
Channelling capital into investments with positive environmental and social impacts will help Singapore get on track to recover from COVID-19 and pave the way to a sustainable future. As the leading sustainability consultancy in Southeast Asia, Paia Consulting supports organisations by advising on:

  • The issuance of green bonds as defined by the leading global frameworks for these bonds (e.g. International Capital Market Association (ICMA))
    • Sustainability bonds come with more reporting and verification requirements than regular corporate bonds. Paia can ensure a company complies with ICMA principles and produce an assurance report.
  • Sustainability factors when formulating a company’s financial strategy and policy
  • How to maximise the value of a company’s sustainability strategy by improving a company’s rank with rating agencies, such as Sustainalytics and Bloomberg.

In the face of global crises, such as the COVID-9 pandemic, climate change, and economic recessions, organisations must innovate, collaborate, and invest or seek investment. Paia is well-positioned to advise you on this journey.

Innovation, collaboration, and investment will help individuals and companies face global crises – the COVID-19 pandemic, economic recession, and climate change – head-on and Paia can help you on that journey.



[1] Asian Development Bank. (2021). Asian Development Outlook (ADO) 2021: Financing a Green and Inclusive Recovery. Asian Development Bank. Singapore’s GDP contracts 5.4% in 2020 – CGTN.

[2] Sustainalytics.

[3] Intergovernmental Panel on Climate Change. (2014). Fifth Assessment Report. (Representative Concentration Pathway 8.5).

[4] Guo, J., Saner, P., Swiss Re Institute, & Kubli, D. (2021, April). The economics of climate change: no action not an option. Swiss Re Management Ltd.

[5] Ibid.

[6] Parker, Gillian. (2021, May).

[7] Monetary Authority of Singapore’s (MAS) Green Finance Action Plan.

[8] Singapore Government Green Plan.

Feature Photo credits: by Micheile Henderson on Unsplash