Private "green" financing initiatives
The Monetary Authority of Singapore (MAS), Singapore's central bank and integrated financial regulator, leads the Project NovA! Development consortium,1 which has launched a minimum viable product (MVP) to assist banks to tap into artificial intelligence (AI) when issuing sustainability-linked loans (SLLs) in the real estate sector. The NovA! MVP, which concluded the first phase of its work on 14 November 2023, addresses the following challenges faced by banks in extending SLLs:
- Inaccurate settings for sustainability performance targets (SPTs) due to data scarcity and inconsistency
- Greenwashing concerns, which the MAS estimates affect about 50% of SLLs
- Inefficient processes leading to manual errors in reading and interpreting disclosures from lenders
The AI-powered MVP developed in phase one of Project NovA! offers three core features2 to address the above challenges:
- Facilitate setting performance targets for SLLs in the real estate sector through peer and industry benchmarking: By harnessing data from government sources and conducting property-specific peer and industry comparisons, AI technology can be used to help banks set KPIs judiciously and establish practical SPTs to enable a more accurate sustainability assessment.
- Monitor against selected KPIs/SPTs to curb greenwashing: By using buildings' energy consumption data continuously at source, NovA! enables banks to compare borrowers' current sustainability performance with the agreed SPTs in a timely manner. Risk assessment teams from banks can swiftly identify discrepancies, ensure SLLs maintain their intended impact, and curb greenwashing.
- Enhance processing sustainable finance transactions through the Autonomous Documentation Insights Engine. This feature uses natural language processing to enable banks' relationship managers, know your client (KYC) teams and sustainable finance units to extract sustainability insights, such as a company's total GHG emissions, swiftly and accurately from diverse sources. This is a shift away from manual processing of disclosure documents, allowing for more informed decision-making based on comprehensive data extracted from borrower disclosures.
Green Finance Industry Taskforce
The MAS leads the finance industry Green Finance Industry Taskforce, which issued the finalized Singapore Asia Taxonomy ("Taxonomy") in 2023. To promote green financing, funding and investment in Singapore and within the Association of Southeast Asian Nations, and to avoid unintended greenwashing, the Taxonomy uses science and technical screening to classify economic activities and projects as one of the following:
- Green (environmentally sustainable)
- Amber (transition, with the sunset date of 2030)
- Ineligible
They are classified based on their contribution to at least one of the Taxonomy's five environmental objectives, while at the same time not causing any significant harm to the other four:
- Climate change mitigation
- Climate change adaptation
- Protect healthy ecosystems and biodiversity
- Promote resource resilience and circular economy
- Pollution prevention and control
The MAS intends for market participants, such as asset owners, investment managers, financial institutions, issuers, policymakers, regulators and other stakeholders, to use the Taxonomy to identify and allocate capital to green and transition activities and projects.
The Taxonomy's standardized green eligibility criteria for Singapore-based real estate and construction activities uses the Green Mark: 2021 certification to evaluate a building's environmental impact and performance:
|
Activities |
Activity classification |
Main technical screening criteria |
|
Construction of new buildings |
Green |
Prevailing Green Mark: 2021 certification, or office buildings (or portfolio) in Singapore meeting Climate Bonds Initiative (CBI) certification criteria Eligible international certifications (e.g., Australia: Green Star Homes; China: Evaluation Standard for Green Building; India: India Green Building Council (IGBC) Green Homes; international: Leadership in Energy and Environmental Design (LEED) (Gold or Platinum), Excellence in Design for Greater Efficiencies (EDGE) or International Living Building Challenge Certified) Certificate validity: five-year maximum limit if the certification does not impose a limit or has one that is longer than five years |
|
|
Amber |
No amber category for new buildings |
|
|
Ineligible |
Buildings are dedicated to extraction, storage, manufacturing, and transport of fossil fuels but do not include buildings providing office space to fossil fuel companies for administrative or trading activities. |
|
Installation, maintenance, repair of equipment |
Green |
Complies with one of the following criteria:
|
|
|
Amber |
No amber category: Technology is sufficiently developed to meet green criteria |
|
|
Ineligible |
Buildings are dedicated to extraction, storage, manufacturing, and transport of fossil fuels but do not include buildings providing office space to fossil fuel companies for administrative or trading activities. |
|
Renovation of existing buildings |
Green |
Complies with one of the following criteria:
|
|
|
Amber |
Minimum 30% reduction in emissions or energy consumption if not meeting the certification standard above (based on energy usage, primary energy demand (PED) or GHG emissions) up to the 2030 sunset date |
|
|
Ineligible |
Buildings are dedicated to extraction, storage, manufacturing, and transport of fossil fuels but do not include buildings providing office space to fossil fuel companies for administrative or trading activities. |
|
Acquisition or ownership of buildings |
Green |
Complies with one of the following criteria:
|
|
|
Amber |
The building is within the top 25% of the national BEBR or regional building stock expressed as operational PED or GHG emissions or energy consumption and demonstrated by evidence. The sunset date for this activity is 2030. |
|
|
Ineligible |
Buildings are dedicated to extraction, storage, manufacturing and transport of fossil fuels but do not include buildings providing office space to fossil fuel companies for administrative or trading activities. |
Public "green" financing initiatives
[Please refer to BE Transformation GFA Scheme and GMIS-EB 2.0 above.]
[1] See the MAS media release: MAS-Led Consortium Develops AI-Powered System to Support Sustainable Finance in Real Estate Sector; 14 November 2023.
[2] NovA! A whitepaper on accelerating sustainability with AI November 2023.