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

President Biden signs an executive order on the Paris climate agreement

What Biden Re-joining the Paris Agreement Means for Climate Action

By Nicole Lim

As you may have heard by now, newly inaugurated President Biden returned the United States to the Paris Agreement. This will officially take effect in 30 days. The President also signed executive orders [1] overturning some of Trump’s other policies that had environmental implications, including putting a halt to the controversial Keystone XL pipeline.

Since Biden first announced [2] that re-joining the Paris Agreement would be one of his first moves in office, many have been anticipating this day. For climate action and for many other reasons, today was a day that marked the beginning of a new era.

But beyond the politics and symbolism of it all, we wanted to take a look at what this all means for climate action and sustainability.

Ambition, leadership and science

As world’s second largest emitter of greenhouse gas emissions (GHG), behind China, the U.S. re-joining the Paris Agreement must come with bold and decisive commitments and plans to significantly reduce GHG emissions. When the U.S. first joined the Paris Agreement under the Obama Administration, the U.S. had pledged to reduce emission levels between 26-28% by 2025 from 2005 levels. At present, it is not on track to reach those goals.

Much has changed since then, and Biden will now be expected to raise the bar by setting more ambitious targets that capture its “fair share” of emissions. Not only that, with China announcing its commitment to be net-zero by 2060 [3], the E.U. to be the same by 2050 [4], and many other net-zero commitments by strong Asian economies, the pressure is on for the U.S. to take on an increased leadership role.

Thankfully, science, as Mr. Biden indicated in his executive order, would guide U.S.’s climate action.


It is, therefore, the policy of my Administration to listen to the science.

Executive Order, 20 Jan 2021

Therefore, we can minimally expect that Washington will set targets in line with the Intergovernmental Panel on Climate Change’s (IPCC) guidance on reducing GHG emissions by 45% by 2030 (from 2010 levels) and reaching net-zero by 2050.

Organisations and corporations often adopt or align with national climate targets. With the U.S. being a crucial player in the global economy, their targets send signals and inform how the private sector globally might respond to climate change.

Climate finance and pricing carbon

A striking feature of Mr. Biden’s executive order was Sec. 5.  Accounting for the Benefits of Reducing Climate Pollution. It requires all agencies to capture the full costs of GHGs through incorporating the social cost of carbon” (SCC), “social cost of nitrous oxide” (SCN), and “social cost of methane” (SCM) into cost-benefit analyses in decision-making. To facilitate this, the President has established an Interagency Working Group on the Social Cost of Greenhouse Gases, led by economists and scientists.

The Working Group has been tasked to publish an interim SCC, SCN, and SCM within 30 days (by 21 February 2021), and establish a final SCC, SCN, and SCM no later than January 2022. These costs will be used by agencies in valuing GHGs from change in regulation and other relevant agency actions. The Working Group will also be providing recommendations to the President on where and how these costs can be applied in decision-making.

Mr. Biden also made clear that these costs are to “reflect the interests of future generations in avoiding threats posed by climate change”.

The President also has a $2 trillion plan to invest in the transition from fossil fuels to clean energy [5]. This plan will see the transformation of the U.S. automotive industry to produce increased zero-emission / electric vehicles, green infrastructure, carbon-neutral power, energy-efficient buildings, investment in green innovation, clean agriculture and job creation. Since Biden’s announcement, stock prices of ESG companies that stand to benefit in a decarbonised world have soared [6]. We can expect to see these sustainable, ESG-focused companies to be at the forefront in the coming years.

Ahead of stronger sustainability and ESG regulation, companies are already bracing themselves for increased expectations [7], and some trade groups and organisations have begun meeting with the Biden team to review ESG matters and potential risks.

Outside U.S. shores and as part of commitments under the Paris Agreement, the U.S. will also be expected to play a big role in helping developing nations finance a fair, just and equitable shift away from carbon-intensive industries and fossil fuels.

Moves to watch

So much today, but it is only the beginning. Moving ahead, there are many developments to look forward to.

With COP26 around the corner, it is likely that we will see the U.S. and its newly assembled team of climate experts [8] convene with other leaders to ramp up ambition and align action ahead of the COP. In light of many other nations committing to a green transition, will we see unity and global solidarity like we saw in Paris? Backed by green technologies and corporate ambition, will world leaders take bolder action?

Come 21 February, the Working Group will announce an interim SSC, SCN, and SCM. Based on the Obama administration’s formula, the price per ton would now stand at $52. However, Trump officials reduced it to between $1 and $7 per ton. Economists believe that the Biden administration’s price might start at $125 per ton to better reflect latest climate science and market realities. [9] We can expect the price that Washington sets to impact analysts’ valuation of companies, which will be carefully watched by investors.

By 1 February, the Biden administration has promised additional executive actions to address the climate crisis. Subsequently, the $2 trillion climate package is expected to be passed. With so much optimism surrounding this, it remains to be seen if they will live up to expectations and deliver the action needed in our race towards a decarbonised future.


These series of events have instilled hope, inspiration, and ambition. The global pandemic has awakened the need for change, we are optimistic that the world will embark on an acceleration of climate action like never before.


What does this all mean for your organisation? Paia helps companies build resilience against climate change and increased expectations to decarbonise. Over past two decades, Paia has been supporting leading corporations across the region to prepare for a decarbonised future through strategically integrating climate and ESG considerations into business. Do speak to us to find out more.