Realising Singapore’s ambition to become a Little Green Dot

As announced by Finance Minister Lawrence Wong on Feb 18, “Budget 2022” further underscored Singapore’s commitment to tackling climate change.

Citing advances in technology and opportunities for international collaboration as enablers, Wong spelt out Singapore’s ambition to achieve net zero emissions by or around mid-century, a marked acceleration from the initial Long-Term Low-Emissions Development Strategy to do so “as soon as viable in the second half of the century”.

To achieve this hastened net zero timeline, the government announced an increase in carbon taxes which was previously kept low at S$5 per tonne of emissions.

Taking a phased approach, the rate is set to rise to S$50-80 by 2030, an unexpected turn from the S$10-15 estimates predicted by industry watchers. The move is a clear signal for companies to seriously investigate their emissions and to begin or accelerate their transition plans lest be hit with higher costs.

While the government’s proposed transition framework and use of carbon tax revenue will help cushion the impact on companies, it is equally important to consider measures required to realise a just transition - where those affected by the low-carbon shift are being taken care of and no one is left behind or worse off as we transition.

This is where the carbon tax can also be framed as a “carrot” policy - through the government reinvesting the carbon tax proceeds to further enable a smooth transition for workers and businesses.

Whilst funding recipients can be varied, one such area could be to build skills and capabilities required across the workforce to realise our transition to a low-carbon economy.

Finance sector alignment is a critical enabler in building Singapore’s transition. To ensure it remains an instrumental facilitator for the transition of our economy, the financial sector will need to upskill, namely in the areas of sustainable finance and investments.

The Singapore government has been clear with where it wants its financial sector to head towards: to develop Singapore as the leading green finance hub regionally and globally. The Monetary Authority of Singapore (MAS), for instance, has launched the Sustainable Bond Grant Scheme and the Green and Sustainability-Linked Loans Grant Scheme to drive market development.

Additionally, the MAS and Singapore Exchange have put in place Guidelines on Environmental Risk Management for financial institutions and climate-related disclosure requirements for listed companies respectively, both starting in earnest this year. These regulatory requirements will help ensure players of the economy are equipped to participate in the sustainable finance market.

Moving forward, “Budget 2022” saw the government committing to issue up to S$35 billion of green bonds by 2030. The next step will be for the market to see the details but the intent is clear: to increase the quantum of finance available through green instruments in an attempt to encourage and accelerate a shift towards sustainable commercial behaviours.

The recent development of Singapore’s financial sector is but one example of transition. All sectors of the economy will have to look to transition - and we would need the right talent to realise this.

As we transition to a low-carbon economy, policymakers, including those in Singapore, are laser-focused on promoting the transition to green jobs.

According to the International Labour Organization (ILO), the shift to a greener economy could create 24 million new jobs globally by 2030. To capture this opportunity, a shift in the nation’s skills is required.

According to a HSBC report, the approach to future green skills should be broken into three windows: upskilling existing (but changing) job profiles; developing skills for new jobs; and re-skilling to help workers in declining value chains.

To prepare, businesses will need to formalise and tighten their approach to sustainability, including equipping employees, senior leaders and board members with relevant knowledge and skills to navigate developments brought about by climate change.

Several initiatives have been launched in Singapore to assist financial institutions and businesses to achieve this capability building. This includes the MAS-supported launch of the Singapore Green Finance Centre in 2020, and the launch of Climate Governance Singapore in 2021 to enable climate change discussions at the board level. More recently in February, the Institute of Banking and Finance Singapore (IBF) and MAS have set out 12 Sustainable Finance Technical Skills and Competencies (SF TSCs) needed for different roles. The SF TSCs are part of the IBF Skills Framework for Financial Services and serve as a reference for the design of training programmes.

Carbon tax proceeds could be reinvested into developing ESG capability-building roadmaps for strategic sectors, such as those that are carbon-intensive or play an enabling role, as a start. These roadmaps may help identify the target audiences requiring re-skilling or upskilling within a sector, serve as helpful reference for companies when they develop their own ESG learning roadmaps, and be a part of the Republic’s Industry Transformation Maps refresh exercise taking place in the next five years.

But this will be a fast-moving challenge requiring government and businesses to constantly assess if talent development initiatives are in line with global sustainability trends while meeting business needs.

Drawing lessons from COP26, 2022 needs to be a year of pivoting from commitments to genuine action. With Singapore shifting gears to accelerate its net zero ambitions, the financial sector and the wider business community will have to move at pace to build a workforce and leadership that can effectively navigate the complexities, risks, and opportunities brought about by the nation’s transition plans. But companies can’t do it alone. In tandem, we look forward to seeing a continued iteration of existing policies, along with the development of new initiatives that drive greater adoption and respond to shifting business needs.