Singapore, a small city-state with an economy reliant on imports, faces significant threats from climate change, including rising sea levels and heat waves.
To combat these challenges, the government has committed to spending 100 billion Singapore dollars (approximately $74.15 billion) over the next century on climate adaptation efforts.
This strategy focuses on minimizing damage from climate impacts, contrasting with mitigation approaches like carbon pricing and renewable energy investments.
However, experts argue that public funds alone will not suffice. They stress the need for private capital from banks, insurance companies, and financial markets, alongside blended finance solutions involving public-private partnerships.
Blended finance and catastrophe bonds were crucial for Singapore’s climate resilience efforts.This issue is not unique to Singapore; globally, adaptation financing has lagged behind mitigation efforts, partly due to the belief that adaptation projects don’t generate revenue. Xinying Tok of Carbon Trust highlights that this misconception leads to poor financial valuations of adaptation projects.
Prime Minister Lee Hsien Loong has emphasized that climate change is a critical issue for Singapore.
With sea levels expected to rise by up to 1 meter by 2100, and potentially more due to factors like storm surges, one-third of the city-state could face flooding. To address these risks, projects include building resilient water systems and sea walls.
Current adaptation projects are largely funded by public sources, but private-sector collaboration is essential. The Singapore Green Finance Centre (SGFC), launched by Imperial College London and Singapore Management University, aims to promote climate financing solutions.
To mobilize private capital, mechanisms like catastrophe bonds and green bonds are employed.
The Monetary Authority of Singapore supports catastrophe bonds through its Insurance Linked Securities Grant Scheme, which has produced numerous bonds. Green bonds are predominantly issued by the public sector, with corporate green bond activity still developing.
De-risking adaptation investments through subsidies or regulatory adjustments is crucial. The World Resources Institute advocates for blended finance strategies, such as risk-sharing mechanisms, to attract private investment.
By enhancing market coordination and developing better risk models, Singapore can improve its adaptation financing and better prepare for climate impacts.