Singapore must flex its Green Fintech credentials ahead of COP26

By Benjamin Soh

With less than six months to go to the United Nations Climate Change Conference (COP26), scheduled to be held in the city of Glasgow in November under the presidency of the UK, now is the time for Singapore to flex its green fintech credentials.

How are we, as a small but innovative and highly capable city-state (that has always punched well above its weight in the international community), going to contribute to a greener planet in the decade ahead?

When we started out as a young ambitious fintech company, our mission was mainly to serve the large financial institutions by providing them with innovative technology to make their back-end processes more efficient.

Within the last 12 months, however, we realised that many financial institutions are starting to move towards more green and sustainability goals, which resonates very well with who we are as a company.

Bridging the US$2.5 trillion green funding gap

The data shows that as of the end of last year, only 0.3 per cent of all bonds in the market are actually green.

Moreover, the total amount of green financing each year is only up to about US$1 trillion, despite the UN Sustainable Development Goals estimating an annual funding shortfall of US$2.5 trillion.

While a majority of the funding (as much as 80 per cent) going towards sustainable projects is being contributed by the public sector, that still leaves a substantial gap that has to be filled by the private sector.

That's where we, as a fintech company serving largely the private enterprises in the financial sector, have started to see the convergence of the private financial sector and green investment to the point where, going forward, we expect all finance will be green in one form or another.

There are already some very interesting use cases out there, especially in Asia: we are starting to see sectors like transportation and logistics in Singapore, for example, which contribute 13 per cent of all greenhouse gases, becoming a big opportunity for the banks to finance the transition to more sustainable alternatives.

There needs to be technology collaboration among all stakeholders to provide better data infrastructure and monitoring technologies that enable financial institutions to make green financing quicker and more effectively.

Establishing a common green infrastructure for Singapore

There are a lot of green technologies out there already, especially here in Singapore where we have a world-class pool of innovative entrepreneurs (just look at some of the great incubated start-ups NUS and other research institutes have developed over the years as an example).

Today, there are easily a few hundred technology start-ups in Singapore that are solving real problems with real solutions, but that can also make it a fragmented landscape for financial institutions trying to find the right partner to work with on green fintech solutions.

With so much new technology out there, there isn't really yet a green tech standard in place - this is one thing we need to overcome together by establishing some form of common data infrastructure or digital interface.

We’re very encouraged by what GovTech has achieved with its SingPass and CorpPass initiatives, which have provided a standard across various agencies (anyone who grew up in Singapore knows that this was not always the case).

That's something that we are also striving towards as a fintech company, because we believe we now need a common underlying infrastructure whereby we are able to support various types of innovative, exciting technologies on a common project source.

This will allow the industry at large, including all the tech companies and banks, to better monitor the progress of green projects and ensure financing is not just green at the point of application (i.e. of a loan) but also throughout the entire life cycle.

Preventing greenwashing in cross-border transactions

As a Singaporean tech firm, we understand that Singapore is a relatively small part of a much larger Asean region with over 650 million people.

It should come without surprise, therefore, that many Singapore companies, including the local banks, have exposure in various other countries across the region.

When a Singapore-based company hands over a relationship to another bank or party in another market, we need to be able to verify the authenticity of all the data that goes with that in order to be fully transparent about what is fake and what is real.

That's where we believe our implementation of the blockchain to verify, authenticate, and automate (through the use of smart contracts) certain actions when certain conditions are met is key.

Vice versa, our technology triggers notifications when tampering has taken place, effectively preventing greenwashing.

By using these technologies in a collaborative spirit, we are better able to cross borders without sacrificing the effective tracking of source data in the financial sector.

COVID: a positive force for green change

Over the past year, COVID has undoubtedly brought about a change in mindsets.

In the finance sector especially, we used to have to do a lot of in-person meetings and demonstrations, with long processes involved just to get started on projects.

With COVID there's now a new normal that has made it acceptable to see each other virtually, which has been very helpful to getting projects and tech implementations off the ground.

Ultimately, to achieve all these green goals over the coming decade is going to require changes across the board - everything from consumer behavior to new incentives and penalties that align with ESG-based outcomes.

We see technology as an enabler and financial institutions as the facilitator, which means there will be a very real coming together of “fin” and “tech” if we hope to create lasting green change in consumer and corporate behaviour for a better planet.

I hope these are some of the messages we, as a nation, can take to COP26 later this year when we go to contribute our ideas on the world stage - as a small but innovative community that is ready to punch above its weight on the green agenda, like everything else we do.

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