By Kimberley Kao and Fabiana Negrin Ochoa
Singapore's central bank is stepping up a green finance collaboration with its counterpart in China, it said Tuesday, as it separately announced plans to sell up to US$1.9 billion of sovereign bonds to fund environmental projects.
The Monetary Authority of Singapore said the initiatives discussed at the latest meeting with the People's Bank of China on Tuesday included the facilitation of green finance flows between the two countries, and development of a decarbonization ratings platform.
By the end of this year, the two central banks also aim to finish mapping a taxonomy to facilitate the cross-border issuance of green bonds and loans by companies in both countries. The efforts include the creation of a so-called green corridor between Singapore and China.
MAS and the PBOC have been working together on decarbonization efforts under a joint taskforce formed in 2023. Their aim is to scale up green and transition funding flows between Singapore, China and the wider region.
The moves come as sovereign bonds make up an increasing share of the green bond market. Data compiled by the Climate Bonds Initiative nonprofit puts sovereign green bond issuance at about $120 billion in 2023, up from about $38 billion in 2020. Bonds issued directly by government departments made up over 20% of the total market value as of end March 2023, versus approximately 7% as of end-December 2017, according to MSCI Research.
According to MAS's statement, the Singapore Exchange, the city-state's main bourse operator, is working with China International Capital--a state-owned investment bank--on a pathway to smooth the bilateral flow of environmental financing. The initial focus is encouraging so-called green panda bonds, "given the demand from Singapore issuers to raise capital in the Chinese onshore bond market," MAS said.
Panda bonds are yuan-denominated bonds from non-Chinese issuers sold in mainland China. CapitaLand Investment earlier this year raised 1 billion yuan (US$138.2 million) via panda bonds under the green corridor, which the central banks hope will spur more funding.
Separately, MAS also announced plans to issue from 2.1 billion Singapore dollars (US$1.56 billion) to S$2.5 billion of green bonds. The notes will have a tenor of about 30 years and will be used to raise proceeds for environmental purposes, as outlined in Singapore's green bond framework.
The Singapore government previously said it plans to issue up to S$35 billion in green bonds by 2030.
The framework states that bond proceeds must be used for green expenditure that contribute to the environmental objectives set out in two widely used international set of guidelines: the ICMA Green Bond Principles and the Asean Green Bond Standards.
The green bonds will carry a fixed coupon rate of 3.25%, a term sheet showed, and mature on June 1, 2054. About S$2.45 billion will be sold to institutional and other investors, with the remainder being offered to the public.
DBS Bank Ltd. (B&D), HSBC and Citigroup are among the bookrunners for the issuance, the term sheet showed, with DBS serving as the green structuring advisor. Settlement is expected on June 3.
"Significant capital and a range of financing instruments are required for Asia to decarbonise while enabling sustainable economic growth," said Clifford Lee, global head of investment banking at DBS. "Singapore is well-placed to accelerate the development of ESG financing to support this transition."
Write to Kimberley Kao at kimberley.kao@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com
(END) Dow Jones Newswires
05-21-24 1030ET
