KPMG Proposes Budget 2023 Measures to Drive Singapore’s Green and Inclusive Growth

Multinational professional services firm KPMG announced its Singapore Budget 2023 Proposal for the Government, covering focus areas including sustainability.

KPMG says green finance will be key to powering Singapore’s sustainability and spurring blended finance and transition finance ecosystems will be instrumental in intensifying green investments

While Singapore has taken steps on its climate commitments through its Singapore Green Plan and its recent appointment of a Government Chief Sustainability Officer, the key challenge ahead, particularly with economic headwinds expected worldwide, will be in financing the green agenda.

A strategy KPMG recommends is for the Government of the city-state to implement a national framework to spur the growth of blended finance to address the trilemma of security, affordability, and sustainability. This framework can include broad-based schemes with low entry thresholds and targeted initiatives for emissions-intensive industries or transition projects.

Ong Pang Thye, Managing Partner, KPMG in Singapore said: “A national blended finance framework can be pivotal for sustainable change to happen at-scale nationally and regionally. Countries and companies in the region are also keeping sustainable development on top of their agendas. However, securing funding can be challenging with individual countries facing ongoing economic headwinds, while dealing with domestic developments and priorities.”

As part of this framework, Ong adds the Government could encourage financial institutions (FIs) to step up their involvement in the climate transition (through incentives) – this can involve FIs redirecting the necessary capital to areas with the highest needs.

“At the same time, authorities can also extend access to Singapore’s Sustainable Bond Grant Scheme to a wider audience of issuers that need financing for green projects. The successful implementation of such a blended finance framework in the longer term will position Singapore as a leading green finance hub to anchor ASEAN’s green and just energy transition,” said Ong.

Generate and Transfer Model

To tap the potential of green bonds in energy transition, KPMG proposes to set frameworks for analysing a project’s qualification for green investments, including introducing a green credit scoring system with new environment and energy factors.

As renewable energy technologies begin to mature in this decade, investments into green infrastructure projects and research and development (R&D) capabilities will be critical.

The Government can consider pumping investments into large-scale alternative energy projects in ASEAN countries under a “generate and transfer model” to accelerate the nearshore import of renewable energy and decarbonise the grid at a quicker pace.

Other measures to further drive the decarbonisation agenda include:

  • Working with industry bodies to boost support for FIs, such as setting up a new subset of qualifying activities under the Financial Sector Incentive scheme which provides for concessionary tax rates, enhanced deductions or cash grant scheme

  • Extending consumer tax incentives, such as the EV Early Adoption Incentive and the Vehicular Emissions Scheme to further bridge price differentials between electric vehicles and internal combustion engine vehicles.

  • Incentives to bridge the green building demand-supply gap, including a 200 percent tax deduction on financing costs and rental of green properties, a 30 percent property tax rebate and a 50% exemption on taxable gains from green building sales.

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