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US, Singapore agree to tackle climate risk, boost clean technology investment

25 August 2021 Amena Saiyid

A joint US-Singapore agreement to tackle climate and environmental risk and to boost investment in clean energy technology, especially in the marine sector, bodes well for businesses, IHS Markit analysts say.

US Vice President Kamala Harris and Singapore Prime Minister Lee Hsien Loong inked a first-ever climate partnership between the two nations on 23 August as climate-fueled impacts in the form of sea-level rise and coastal flooding become real. The agreement calls for creating opportunities for businesses and workers in "green growth sectors," including sustainable finance and transport, quality carbon credits markets and energy transition.

"The nations of Southeast Asia know the impact of the climate crisis all too well: the rising sea levels, the typhoons, the floods. These disasters have cost human life and livelihoods," Harris said 24 August, adding that the latest United Nations Intergovernmental Panel on Climate Change's report on global warming has made it clear that "the crisis, of course, is getting much more urgent."

In the area of sustainable finance, the agreement urges the two states to work together to develop high-quality climate standards that includes collaborating on financial sector climate and environmental risk management and mobilizing private climate capital for climate mitigation adaptation. The partnership also supports work on regional clean energy infrastructure development at ports and shipping and developing of green building codes to reduce GHG emissions.

Lacking in detail

The announcement lacked detail about specific actions the two governments intend to take. In the fact sheet accompanying the announcement, the White House said, "experts from the departments of Commerce, Energy, Transportation, and Treasury will undertake bilateral consultations with their counterparts in Singapore to develop standards and a medium-term program of work" to launch the partnership.

IHS Markit climate and sustainability analysts, however, see opportunities for clean energy finance and technology development in this partnership, given Singapore's significance in Asian trade.

"Singapore has a very small carbon footprint compared to other Southeast Asian countries, but it is a key financial and shipping hub, so any standards it adopts in those areas could have much bigger impact than just itself - from financing for new energy projects to new emissions standards for ships," Xizhou Zhou, IHS Markit research and analysis vice president for climate and sustainability, told Net-Zero Business Daily.

Vulnerable to coastal flooding

The city state, which spans 277.7 square miles and is nearly the size of New York City, is most vulnerable to sea-level rise and coastal flooding caused by a changing climate.

Unlike the US, Singapore has offered only a modest program for reducing its carbon emissions so far, as its National Climate Change Secretariat notes that it contributes only about 0.1% of global carbon emissions. The secretariat said it is expecting to peak its carbon emissions at 65 million mt of CO2 equivalent (MtCO2e) by 2030 and then to halve those levels by 2050 "with a view to achieving net zero emissions as soon as viable in the second half of the century. China also has indicated it's GHG emissions will peak 2030 before aiming for aiming for a net-zero goal by 2060.

For comparison, the US has committed to halving its emissions by 2030 and to achieving a net-zero economy by mid-century. The US also is working on a proposal for disclosing climate risk for publicly listed companies that is due at the end of the year.

Important Financial Center

Singapore is described as a "a small Asian heavyweight" by foreign affairs expert Ankit Panda in a backgrounder for the Council of Foreign Relations, due to its location aside the "strategically vital Malacca Strait and the South China Sea."

According to Panda, Singapore's importance stems from being a strategic ally of the US and also because it has continued to maintain close ties with China. The city-state has continued to maintain a neutral stance when it comes to both global economic powers.

Ahead of the UN COP26 climate conference this November, any moves by financial centers to align themselves with the US are significant, IHS Markit Climate & Cleantech executive director Peter Gardett said. "Singapore is one of the most important financial centers in Asia-Pacific, and even these very nascent moves are meaningful for maintaining the US position as a leader in global climate finance ahead of COP26," he said.

Protecting Singapore reserves from climate risk

In June, Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), announcing the central bank's inaugural sustainability report, said it would create a climate-risk portfolio for its foreign reserves so it can reduce risk across different climate scenarios, and seize investment opportunities from the transition to a lower-carbon future and support the transition of portfolio companies.

The MAS indicated that the Singapore Exchange, where many of the Southeast Asia firms are listed, is planning to write climate reporting rules for companies based on the 2017 guidelines penned by the Task Force for Climate-Related Financial Disclosures

For its equity holdings, the MAS said it would reduce exposures to carbon-intensive sectors, such as energy, materials, and utilities, while maintaining exposures to those companies within these sectors that it said are "likely to make a successful transition."

The MAS also has allocated $1.8 billion for its Green Investment Fund Programme that will be managed by five asset managers whose job will be to catalyze sustainability projects in Asia and to enhance the portfolio's climate resiliency.

Temasek a key player

Singapore's significance as a financial hub cannot be understated as it is home to Temasek Holdings, a state-owned investment fund which has S$381 billion ($281.5 billion) in assets under management.

Temasek deferred to the governments of US and Singapore to comment on the implications for the industry. However, Temasek in May joined forces with BlackRock to provide $600 million in seed money for Decarbonization Partners, a $1 billion fund. The fund will focus on early-stage growth companies with proven, next-generation renewable and mobility technologies, according to the partners. These would include emerging fuel sources, grid solutions, battery storage, and electric and autonomous vehicle technologies as well as in building and manufacturing sectors to drive decarbonization, resource efficiencies, and material and process innovation.

Decarbonizing the economy

To meet its environmental goals, Singapore is harnessing its own reserves as well as private sector capital to decarbonize its most carbon-intensive sectors, which remain industry, followed by power generation and transport.

Singapore has served as a natural location for oil storage and refining facilities serving the region, with the industry contributing nearly half or 46.7% of its 52 MtCO2e in 2019, the Secretariat said.

The Maritime and Port Authority of Singapore (MPA) and Singapore Maritime Institute on 5 August announced plans to co-fund the research, design, build, and operation of fully electric harbourcraft over the next five years. These electrification pilot projects, according to the two agencies, will demonstrate both commercial and technical viability as well as support Singapore's broader plans to mitigate GHG emissions by the maritime transport sector.

The city state's MPA also announced plans in late July to launch a Global Centre For Maritime Decarbonization Solutions with a $120 million fund from the MPA itself along with BHP, a global mining company, BW Group, Eastern Pacific Shipping, Foundation Det Norske Veritas, Ocean Network Express and Sembcorp Marine.

The goal of this center would be collaboration with the industry to help the maritime sector reduce GHG emissions, implement identified decarbonization pathways, and create new business opportunities.

Singapore imports nearly all its energy but is moving towards generating its own power from floating solar facilities along the lines of Indonesia as part of greening its economy despite its tiny global carbon impact.

In mid-July, Sembcorp Floating Solar Singapore, a wholly owned subsidiary of Sembcorp Industries and National Water Agency officially opened the 60 MW Sembcorp Tengeh Floating Solar Farm at the Tengeh Reservoir. With about 122,000 solar panels spanning across 45 hectares (equivalent to about 45 football fields), the facility is now the world's largest inland floating solar photovoltaic system.

Posted 25 August 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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