Singapore is well positioned to be a global leader on regulatory innovation in green fintech, writes Benjamin Soh, Co-founder and Managing Director of STACS.
Singapore has been clear in its ambition to become one of the world’s most developed fintech markets and a leader in green fintech specifically, as part of a wider vision to position itself as sustainability-led in everything it does.
The city-state’s green finance goals are being spearheaded by its regulator and central bank, the Monetary Authority of Singapore (MAS), which has to date unveiled a handful of initiatives focusing on leveraging fintech to deliver the next generation of more trusted and efficient sustainable finance.
To give an example, MAS announced Project Greenprint at the Singapore Fintech Festival last year, which seeks to establish a technology platform aimed at promoting a green financial ecosystem through green fintech.
Project Greenprint is an inspired example of the good a regulator can do by enabling firms to connect with financial institutions and investors to access a wider pool of green financing options and solutions.
As part of this, MAS committed to “deploying technology to collect trusted, quality, timely and verifiable data to better monitor commitments to the relevant green standards and requirements; and leveraging technology to measure the impact of sustainable investments and loan portfolios, and enhance the accuracy of climate risk assessments.”
Combating greenwashing with forward-thinking regulation
MAS has demonstrated a clear and deep understanding of the need to combat greenwashing and ensure that investments marketed as green are actually going to verifiable green use cases.
Moving a bit further back in time, MAS already earmarked SGD 50 million to support green fintech projects under the Green Finance Action Plan announced in November 2019, prior to the global pandemic which has since accelerated the need for action on climate change.
This plan comprised four key pillars: strengthening Singapore’s financial sector resilience to environmental risks, developing markets and solutions for a sustainable economy, harnessing technology, and building a strong base of knowledge and capabilities in sustainable finance.
Alongside MAS, the Financial Conduct Authority (FCA) in the UK deserves credit for its advocacy and support of green fintech, part of which has been demonstrated by its organising of tech sprints, hackathons, and other challenges to encourage fintech companies to develop green solutions.
In July, the FCA explained that these services would better allow them to engage with and support innovative fintech solutions at various stages of their development.
“This includes the initial ideation and proof of concept stage through our TechSprint programme, the further development and validation of proof of concepts to demonstrate market value through our Digital Sandbox pilot, and the testing of innovative propositions in the market with real consumers through our regulatory sandbox,” the FCA wrote at the time.
As we can see, regulators are key to efforts in their jurisdictions to spur innovation and ensure participation from traditional financial institutions that are arguably the ones best positioned to pilot green fintech solutions in live markets.
The corollary example here in Singapore was the Global Fintech Hackcelerator Challenge organised by MAS with a focus on green fintech, which received submissions from all over the world.
In continental Europe, the Bank for International Settlements (BIS) teamed up with the Bank of Italy to jointly host a G20 Techsprint that saw 99 global submissions with innovative ideas to tackle challenges in green and sustainable finance.
Building on regulatory momentum in green fintech
This year’s United Nations Climate Change Conference, also known as COP26, is the UN’s 26th global conference on climate change, scheduled to be held in Glasgow, Scotland from 31 October to 12 November.
As we inch closer to this historic global summit, we see an opportunity for global regulators, including here in Asia, to double down on efforts to provide as much clarity as possible on carbon regulations.
Carbon markets in Asia are arguably less developed than in the EU, for example, so this is an especially exciting opportunity for fintechs and traditional financial institutions in this part of the world.
The standardisation of incentives to better align the private sector with regulatory priorities on sustainability and green finance here in ASEAN would be a good initiative for regional governments to collaborate on.
This would show a willingness to come together on the vital issue of tackling climate change, working closely with the private sector while going beyond any one jurisdiction, and potentially showcasing ASEAN’s ability to be a leading force for green business.
Many corporations and SMEs here have a business footprint across multiple countries in Asia, so cooperation and continued evolution of regulations and standards would help to address the deep-rooted challenge of reducing carbon emissions in the region’s total value chain.
Greater alignment of regional regulations and standards would also benefit fintechs, better positioning them to innovate for positive real change in financial services, not just to deliver more specific platforms and solutions, but also to provide corporations and financial institutions greater accessibility to more cost-efficient green markets.
As we applaud regulators for all the good work they’ve done to date in supporting green fintech ahead of COP26, we also recognise that more can and must be done.
By every country and regulator in Asia and around the world working together to bring about the lasting green change we all want to see for our planet, we could celebrate truly turning a new page in the post-COVID world that lies before us.
Financial markets will play a key role in this, and I am confident that Singapore specifically is well positioned to be a global leader on regulatory innovation in this emerging and exciting area of green fintech.
Benjamin Soh is Co-founder & Managing Director of STACS.