Ravi Menon: Net zero - act now, act fast, act together
Keynote speech by Mr Ravi Menon, Managing Director of the Monetary Authority of
Singapore, at the COP27 Singapore Pavilion Finance Day, Sharm El-Sheikh, 9
November 2022.
* * *
Good morning, ladies and gentlemen. Welcome to the Singapore Pavilion's Finance
Day, hosted by the Monetary Authority of Singapore (MAS).
Climate change is no longer a prediction, it is becoming a reality. The frequency
and intensity of today's extreme weather events have exceeded early climate models.
We are in a race for our lives, to reach net-zero greenhouse gas emissions by
2050. Unless we act now, act fast, and act together, we will lose that race.
We need to act now to start reducing emissions. The world is currently far from a
net-zero emissions trajectory. Global greenhouse gas emissions are still rising, not
falling. If we do not act now to start decarbonising, we risk breaching tipping points that
will lead to catastrophic and irreversible climate change, with unimaginable risks to lives
and livelihoods.
We need to act fast to finance the transition to net-zero. Decarbonisation is a costly
affair. We must also balance decarbonisation and development. The world requires
significant financing for sustainable development and new technologies to reach net
zero by 2050 - by some estimates, US$9.2 trillion annually. This is US$3.5 trillion more
than the annual investment today.
And we need to act together. The climate challenge is too big for governments or any
one country to solve. We need a global effort and a whole-of-society approach within
each country. Effective partnerships across the public, private, and people sectors will
be key to mobilise the financing necessary for an effective and just transition.
As a leading global financial centre in Asia, Singapore can play an important role
At
in mobilising this capital, especially to support Asia's transition to net-zero.
the Singapore Pavilion, we have set out how we will do this through three key strategies:
blended finance to mobilise private capital for the transition
carbon markets
to facilitate emissions abatement and inclusivity
good-quality data to support credible disclosure and track progress
First strategy - blended finance to synergise public and private capital for
Many green and transition projects in
projects that are marginally bankable.
emerging markets pose risks that are not commensurate with their expected returns.
We need catalytic capital to improve project bankability and crowd in private sector
capital. Blended finance is also about combining financing with capacity building,
technology transfer, and institutional support, to reduce risk and enhance bankability.
About a
Blended finance is not new but scaling it requires a fresh approach.
month ago, the Monetary Authority of Singapore (MAS) held the inaugural Transition
Finance towards Net Zero Conference Conference. The conference saw more than 500
leaders and experts from across the world - from industry, academia, governments,
and multilateral development banks - discuss the nuts-and-bolts of what it takes for
blended finance to scale.
What were their key take-aways?
One, greater capacity and expertise to prepare projects. This is critical at the early
stages of project development, especially in developing economies. Transition projects
need to be well designed with clear targets and transparent metrics to draw private
capital.
Two, better risk mitigation and risk transfer mechanisms. We need catalytic and
concessional funding from the public sector, multilateral development banks, and
philanthropic sources, to improve project bankability and crowd in additional multiples of
private sector funding. This will mean re-looking the financing models and incentive
structures of multilateral development banks.
Three, a more synergistic financial ecosystem. We need to recycle capital by taking
loans off bank balance sheets and structuring them in a form that institutional investors
can participate in.
Singapore is taking active steps to scale transition and blended finance.
Infrastructure Asia, launched by MAS and Enterprise Singapore , provides
expertise in project scoping, shares best practices in project development, and
facilitates infrastructure financing deals in the region.
Clifford Capital, whose borrowings are guaranteed by the Singapore Government,
provides debt financing to crowd in equity participation for infrastructure projects.
Pentagreen
Capital, a partnership between HSBC and Temasek Holdings, will
deploy blended finance at scale to unlock marginally bankable projects in
Southeast Asia.
Convergence, a global network for blended finance, has launched a S$5 million
grant scheme supported by MAS, which will fund feasibility studies and proof of
concept work on innovative blended finance solutions in target sectors that are
under-capitalised in Asia.
Singapore is also partnering global efforts to promote transition and blended
finance.
The Network of Central Banks and Supervisors for Greening the Financial System
(NGFS) has established a Blended Finance Initiative, that will identify best
practices and lessons from past case studies and provide practical guidance on
modalities to scale up blended finance. MAS and the De Nederlandsche Bank
(DNB) will lead this Initiative.I will share more details in my remarks this afternoon
before the NGFS discussion panels at this Pavilion.
Glasgow Financial Alliance for Net Zero Asia-Pacific Network
The will launch an
initiative to develop guidance for financial institutions on how they can facilitate
the managed phase-out of coal power generation in the Asia Pacific. MAS and the
Asian Development Bank will participate in this initiative.
Second strategy - carbon markets to channel financing towards carbon
abatement and removal projects. Many entities find it difficult to eliminate their
emissions or to even reduce them as quickly as they would like. High quality carbon
credits generated by emission reduction and removal projects allow such entities to
offset the emissions they cannot get rid of while providing financing for these projects
that would otherwise not get off the ground. A well-functioning carbon trading
ecosystem is particularly relevant to Asia's transition effort.
The market for voluntary carbon credits is huge. Unfortunately, differences in
carbon accounting and credit recognition practices across jurisdictions have led to
carbon credits being treated with a degree of skepticism. To build an efficient and
trusted carbon market, we will need better and verifiable abatement data, harmonisation
in carbon accounting practices, and interoperability between the voluntary and
compliance carbon markets.
Singapore is well-positioned to be a carbon services and trading hub.
We have sound infrastructure, good governance, and a premium on trust - critical
ingredients for a marketplace.
We are located at the heart of Southeast Asia which is fertile ground to harness
the potential of nature-based solutions for carbon sequestration.Southeast Asia
holds more than one-third of the world's mangroves and has about 120 million
hectares of land suitable for re-forestation.
We are strengthening the carbon credit value-chain by growing project
development capabilities: certify and validate project design, and monitor and
verify project outcomes.
Credible and
Third strategy - good-quality data to support transition finance.
comparable data is foundational for the climate agenda.
Data on carbon stocks, emissions profiles of projects, and historical deal data can
provide the market with a proper view of climate-related risks.
Good-quality data is key to robust sustainability reporting, combating
greenwashing, and enabling investors to make effective ESG-informed decisions.
Good-quality data enables solutions such as blended finance and forms the
backbone of an efficient and trusted carbon market.
But there is a significant gap between data needs and data availability. The ESG
data acquisition process is often manual, tedious and costly. Data verification is at a
nascent stage.
To build a credible ESG data ecosystem, MAS has launched a collaborative effort
Project Greenprint seeks to
with the financial industry called Project Greenprint.
streamline the collection, access, and use of climate and sustainability data through
four digital utilities:
an ESG registry of certifications
an ESG disclosure platform to facilitate reporting
a digital marketplace to connect data users with ESG solution providers
a data orchestrator to aggregate ESG data from multiple data sources
Globally, GFANZ has formed the Net Zero Data Public Utility to address issues
such as data gaps, data accessibility, and data inconsistencies. It will complement
existing climate data initiatives, promote the effective management of climate-related
financial risks, facilitate robust sustainability reporting, and accelerate the formulation of
credible transition plans.
I have provided a quick overview of Singapore's efforts in three key areas of transition
financing - blended finance, carbon markets, and good-quality data. This afternoon, I
will share some of the interesting and impactful work being done by the NGFS in the
areas of blended finance, data, and capacity building.
In all our efforts, I cannot emphasise enough the importance of collaboration and
collective action. We have a common mission: to reduce global greenhouse gas
emissions to net zero by 2050. But time is running out. We must act now, act fast, and
act together. There has never been a greater opportunity for us to find common
purpose, build solidarity, and ensure the sustainability of our planet and better lives for
communities everywhere.
Thank you.