Singapore riding the ESG investment growth

Singapore green buildings are in a sweet spot to capture global ESG investor demand

April 20, 2021

There is a growing appetite for investment in sustainable buildings. According to Deloitte, the share of global investors that have applied environmental, social and governance (ESG) criteria to at least a quarter of their total investment portfolio has risen from 48% in 2017 to 75% in 2019. The rising trend is expected to continue.

The Singapore real estate industry is well-positioned to capitalise on this growth.

One-third of Singapore’s building stock are “green”

According to the Ministry of National Development, as of January 2018, about 3,200 buildings in Singapore have met the Building and Construction Authority’s (BCA) Green Mark standards. This covers more than 94 million square metres, which is approximately one-third of the total gross floor area of Singapore’s building stock.

The Green Mark Scheme is an internationally recognised green building rating system. It sets the parameters and establishes indicators to guide the design, construction and operation of new and existing buildings towards increased energy efficiencies and enhanced environmental performance. Tailored for buildings in the tropics, it was launched by the BCA in 2005 to kick-start Singapore’s drive to green its buildings.

Forging ahead with the sustainability drive, the first and second Green Building Masterplan was introduced in 2016 and 2019 respectively, to encourage developers to adopt green building standards in new developments and existing buildings through legislation and incentive schemes.

A number of major developers were early adopters of green building innovation and practices. Over the past two decades, many new buildings had adopted sustainable design and practices. Existing buildings have undergone progressive retrofitting to meet resource-efficiency objectives to lower carbon emission, maximise energy and water efficiency, reduce waste disposal and increase sustainable use of resources. To be internationally recognised, a growing pool of their assets has received Green Mark and other credible and relevant third-party green building certifications.

Growing pool of investible green buildings in Singapore

Pushing the recent drive to sustainability, the Singapore Government introduced Singapore Green Plan 2030, which establishes targets to “green” 80 per cent of all buildings by 2030 as part of its commitment under the United Nations 2030 Sustainable Development Agenda and Paris Agreement.

On a corporate level, many developers, including City Developments, Frasers Property and Lendlease, have set net-zero carbon goals for their operations. The pool of investible green buildings is set to grow in this decade.

Growing green financing market in Singapore

Increasingly, developers/landlords are also tapping into the fast-evolving green financing market to extend their focus on sustainability. Some have achieved lower long-term borrowing costs as financiers increasingly peg lending rates to ESG performance. Over the past four years, the issuance of real estate green financing loans in Singapore has surged more than eight-fold, from SGD 785 million in 2017 to SGD 6.6 billion in 2020.

Confluence of factors driving investor demand for ESG buildings

Rising global demand for ESG investment, combined with an increasing pool of green buildings and a growing green financing market, will accelerate green property investments/acquisitions in Singapore.