Singapore set to introduce tax-exempt bonds
In recent years, global green bond markets have grown rapidly over the years, reaching more than US$80 billion (S$112 billion) in 2016, according to Second Minister for Finance Lawrence Wong. He noted that the market was also starting to kick off in Asia.
Mr Wong announced Thursday (Mar 23) that The Monetary Authority of Singapore (MAS) will begin introducing green bond grant schemes starting June to keep up with increasing demands for sustainable investments.
Green bonds are essentially debt instruments with yields set aside for environmentally friendly projects. The tax-exempt bond finances projects that cultivate positive environmental habits, such as lowering greenhouse gas emissions and pollution.
Investors can be assured that their funds will be channeled into projects that deliver environmental benefits.
Investors may also find green bonds a more attractive investment as compared to taxable bonds because of its tax-exempt status.
Issuers can offset $100,000 of costs incurred from obtaining an independent review based on international green bond standards.
PwC Singapore’s Asia-Pacific Asset and Wealth Management Leader Justin Ong said: “the world as I see it is starting to change. A lot of the investors today are much more focused around ‘What am I putting my money in? Would I be prepared to forgo some returns to make sure that I am happy with the kind of structures and kind of policies the company is making?’ And we are starting to see that to change.”
Green bonds are therefore a way of providing monetary incentives to tackle prominent social issues such as climate change and a movement to renewable sources of energy.
To qualify:
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Bonds may be denominated in any currency
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Bonds have to be issued in Singapore
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Have minimum size of $200 million and;
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Have a tenure of at least 3 years
Although green bonds incur higher costs, the focus is not necessarily on higher returns, but rather with the mindset of being environmentally aware when making investment decisions.
