Green finance and carbon markets
FinTech and stablecoins
On 30 June 2021, Singapore entered into a landmark partnership(1) with the United Kingdom for cooperation on financial services at the sixth UK-Singapore Financial Dialogue. The partnership, which followed shortly after the Joint Political Statement on the Singapore-UK Partnership for the Future on 4 March 2021, is supported by a new memorandum of understanding (MoU). The MoU reaffirms both countries' commitment to the annual financial dialogue and aims to support increased financial services activities between both countries, facilitate closer regulatory cooperation and boost jobs, trade and investment in the sector.
Three areas of joint interest were discussed and agreed as part of the financial partnership at the financial dialogue:
- the importance of green finance and the development of carbon markets;
- cooperation on the regulation of and information sharing with respect to fintech, stablecoins and other technological developments; and
- enhanced cooperation in the cross-border regulation of financial services.
Alongside the financial partnership, the countries also signed an MoU to increase collaboration in cybersecurity, including the sharing of cyber-related information.
Green finance and carbon markets
Green finance(2) has become increasingly significant as financial instruments and tools shine a spotlight on sustainable products and production methods, and investments in sustainable alternatives. In this regard, both countries have committed to:
- identifying compatible and interoperable taxonomy (classification) principles and metrics for green and transitional activities;
- supporting mandatory climate-related financial disclosures and sustainability reporting that is aligned with international standards and recommendations;
- exploring collaboration on a biodiversity pilot study addressing how nature-related risks affect the financial system; and
- supporting the development of carbon markets, in line with operationalising and implementing the provisions of the Paris Agreement.
In Singapore, several initiatives have already been undertaken. The Green Finance Industry Taskforce (GFIT) convened by the Monetary Authority of Singapore aims to accelerate the development of green finance through:
- developing a taxonomy;
- enhancing the environmental risk management practices of financial institutions;
- improving disclosures; and
- fostering green finance solutions.
The GFIT launched several initiatives(3) in May 2021 to accelerate green finance in Singapore, including:
- detailed implementation guides for climate-related disclosures by financial institutions;
- frameworks for the evaluation of green trade finance transactions;
- a white paper on scaling green finance in different sectors; and
- plans for future workshops and online modules for corporates and financial institutions to build green finance capacity.
As Singapore and the United Kingdom are both major financial centres, a plan to increase support and investment in projects that promote positive and sustainable outcomes will not only contribute greatly to tackling the current issues of global warming and climate change, but also to much needed economic growth.
Technological advancements in the areas of fintech and stablecoins were discussed during the financial dialogue and alongside their impact on each country's regulatory regime. Both countries agreed to:
- share updates on their approaches to regulate these burgeoning fields;
- continue working together through the Global Financial Innovation Network; and
- explore further opportunities to collaborate through the Bank for International Settlements innovation hubs in each country.
Such cross-border collaboration underscores Singapore's efforts to keep abreast of the developments in the global fintech and digital payments landscape. This is in line with Singapore's efforts to enhance existing regulatory frameworks under the Payment Services Act 2019, as reflected in the public consultations on proposed amendments to the Act to address issues and risks associated with fintech and stablecoins, such as anti-money laundering and countering the financing of terrorism,(3) and the scope and regulation of e-money and digital payment tokens.(4)
Singapore's partnership with the United Kingdom was also reinforced by both countries reaffirming their commitment to cooperate and collaborate on a broad range of financial services(5) in order to maintain safe and open financial markets. This encompasses, among other things:
- working towards developing compatible regulatory and supervisory frameworks for financial services to reduce unnecessarily burdensome or duplicative regulatory requirements;
- mutually exchanging information; and
- consulting one another on relevant financial services regulatory initiatives.(6)
Aside from the financial partnership, regulatory cooperation is expected to progress further with the commencement of negotiations on the Digital Economy Agreement between Singapore and the United Kingdom on 28 June 2021. The agreement seeks to open up digital trade channels, create more opportunities for businesses in both countries to deliver their products and services and expand into high-tech markets, and ensure more efficient trade through interoperable digital technology and transactions.
The strengthened cooperation under the financial partnership and the Digital Economy Agreement are timely given the accelerated transformation of the financial services landscape globally. In upholding standards and boosting collaboration in key areas of mutual interest, such as sustainability and digital payments, businesses in both countries should expect a more robust yet compatible regulatory environment that encourages nascent financial services innovations while effectively managing novel risks.
For further information on this topic please contact Daniel Tan, Toby Grainger or Babita Ambekar at CMS Cameron McKenna Nabarro Olswang LLP by telephone (+65 6720 8278) or email ([email protected], [email protected] or [email protected]). The CMS Cameron McKenna Nabarro Olswang LLP website can be accessed at cms.law.
(1) For further information, click here.
(2) For further information, click here and here.
(3) For further information, click here.
(4) For further information, click here.
(5) UK Singapore Regulatory Cooperation, paragraph 3.