The Road to Decarbonising Our Corporations

Sir, it has been an exceedingly long day and, of course, a unique form of torture to debate delicious hawker food on an empty stomach. Therefore, I appreciate all Members who are choosing to stay, so there is not just a soliloquy between the Minister of State Alvin Tan and myself. I cannot promise that a speech on "The Road to Decarbonising Our Corporations" will necessarily be all that riveting, but I will do my very best.

Mr Speaker, this House had, on two prior occasions, raised separate Motions on stepping up our nation's efforts to tackle the climate emergency. Following these debates, the Government announced revised targets for our long-term carbon footprint, peaking at 65 megatons of carbon dioxide emissions (MtCO2e) over the next few years, before tapering down to 60 MtCO2e by the end of the decade, to achieve the net-zero target by 2050.

As a net energy importer, these are undeniably ambitious targets. Still, ensuring that our planet is livable in the future, requires that we be bold in setting goals that are adhered to not only by our Government, but also our households and businesses. Today, therefore, I wish to speak about our road toward decarbonisation, with an eye specifically for our nation's corporations.

I will speak about three related issues: first, I will touch on why focusing on the carbon emissions of the big players alone is not quite good enough; second, I will discuss who we need to train to ensure that our carbon transition efforts eventually succeed; and third, I will explain what role finance can play in all this. I shall close with thoughts on why climate mitigation efforts need not, in fact, undermine our business competitiveness.

The current slate of policies aimed at decarbonisation is comprehensive. In theory, this involves two major steps: decarbonising energy production and electrifying industry, transport and construction. In practice, this encompasses a diverse mix of policies: carbon taxes, energy efficiency standards and grants, shifting our transportation infrastructure toward electrification and sourcing electricity from alternative sources, both in terms of energy type as well as geographically.

While the Government has, appropriately, taken the lead in these, we will only succeed when businesses are also aligned with the programme. And this requires widespread buy-in by companies that, understandably, face a bottom line and are primarily responsive to their shareholders, who may or may not share the C-suite's enthusiasm for incorporating environmental goals. Ensuring that pro-environment sentiment is widely shared by companies and their shareholders is, therefore, crucial for success.

The bluntest measure for addressing emissions is our carbon tax. This was recently raised to $25 per megaton, from a miserable $5 and, will step up to $45 in 2026, before reaching a range of between $50 and $80 by 2030. While this remains below the preferred range for the Workers' Party, not least because it remains somewhat below the median in other advanced economies as well as the costs of carbon capture, we acquiesce to this increase, given how it is, nevertheless, superior to the original status quo.

We have also spoken about how the tax could be adapted according to the contemporaneous state of the economy, to allow firms some latitude to adapt to prevailing macroeconomic conditions.

I had, moreover, previously explained why I believe a broad-based carbon tax is not only consistent with public finance principles, but also ensures psychological buy-in from all carbon generators. To be clear, this would be everyone.

I wish to return to this theme here, in the context of businesses. In Singapore, the overwhelming majority, an estimated four-fifths of carbon emissions, are accounted for by just 50 facilities, spread across the manufacturing, power, water and waste. While we may argue that this would largely absolve us from worrying too much about how the remaining companies contribute to emissions, I believe that this mindset is mistaken.

This is also because climate change is a global problem and if corporations, including those that are not the primary source emitters, fail to seriously consider their total carbon footprint, they may inadvertently outsource their midstream or downstream activities to other emitters without well-defined carbon action plans. Inattention to midstream activities, such as electricity usage, raw material and equipment procurement and commuting and travel policies, could undermine the upstream efforts by their home country governments.

Similarly, downstream choices by firms, decisions over their distribution network or how they deal with the end-of-life treatment of their products, all contribute toward the ultimate impact that corporations impose on the climate.

This is becoming increasingly observed, recognised by observers. It is no longer sufficient to pay attention to only so-called Scope 1 emissions, which are the sources an organization owns or controls directly. Scope 2 emissions, which are caused indirectly by a company based on where it chooses to buy its energy and how it uses it, also matter; as does Scope 3 emissions, which are those not covered by Scope 1 or 2, but are nevertheless created by a business' value chain.

Responsible businesses are also getting on board. This includes more than nine out of 10 Fortune 500 companies and these standards have been road-tested by diverse firms across the world, such as 3M, Acer, Airbus, Coca Cola, Mitsubishi, Pfizer and Shanghai Zidan.

In Singapore, listed companies will be required to make mandatory climate-related disclosures, consistent with the International Sustainability Standards Board (ISSB), by 2025; and this will extend to large non-listed companies by 2027. This will include their Scope 1 and 2 emissions, but only listed companies will be required to do so for Scope 3 emissions from 2026. Larger, non-listed firms are not expected to do so before 2029, which strikes me as an excessive amount of leeway.

Shortening this timeline by a year, for instance, would ensure that they are held to the same standards and expectations as the locally-listed firms. Doing so will also prevent Singapore from losing its competitive edge and status as a global exemplar of climate leadership.

On its part, the public sector has, appropriately, stepped up. The Government commenced its reporting effort in 2023, with the GreenGov.SG report. To complement this report, Statutory Boards will also publish annual environmental sustainability disclosures, starting this fiscal year. Such disclosures will offer an important demonstration effect, showing not only what the Government is doing to advance environmental sustainability, but also what is achievable by the private sector.

Ultimately, a mandatory monitoring and reporting regime will require clear and uniform environmental, social and governance (ESG) standards. This, in turn, also calls for a whole new set of "green skills": the ability to perform corporate carbon accounting, manage firm assets with an eye toward sustainability and provide reporting on a company's ESG impact. Such capabilities are key to Singapore's long-term survival and adaptability in a carbon-constrained world. But they are also presently scarce, a fact that has been repeatedly highlighted as important needs in the multiple editions of the Skills Demand for the Future Economy report.

A Green Skills Committee was set up in 2023, under the auspices of the Ministry of Trade and Industry. The group, comprising representatives from Government, unions, industry and academia, placed their focus on two areas: clean energy and sustainability reporting. If we take this signal seriously, there will be a need to further ramp up training for companies, so that they will be equipped to deliver their climate and sustainability reports at international standards. Similarly, there has to be a body of professional assurance providers that are prepared to audit these emissions reports.

Institutes of Higher Learning will be crucial to help fill this gap. The number of sustainability-related courses supported by SkillsFuture Singapore (SSG) almost doubled to nearly 500 in 2023, up from about 250 in 2022. A quick search on the MySkillsFuture website lists 134 courses related to sustainability reporting, with the most affordable course starting at just $84 for eligible Singaporeans. If this sounds like a marketing pitch, it is probably a good time for me to declare that I am, in fact, employed at the business school which offers such sustainability-related education.

Still, impending compliance requirements will steadily accelerate the demand for skills in sustainable finance, carbon management, decarbonisation and sustainability risk assessment. These capabilities must be seen as central to Singapore's long-term survival and adaptability in a carbon-constrained world. Businesses need to be able to hire professionals with such tools and skills; and afforded time to train and groom their existing workforce in acquiring green skills and competencies.

A study by Arup and Oxford Economics estimates that there could be as many as 170,000 green-related jobs, across all sectors, by next year. Although the Government's own Environmental Services Industry Transformation Map is more modest, pointing to around 1,600 professional, manager, executive and technician (PMET) jobs, the ones that are most likely to be filled by locals by this time.

To further support upskilling and reskilling in the sector, the Government can offer tax deductions or subsidies for employers with a clear training roadmap, in partnership with accredited or approved training providers. Of course, training providers must also be kept accountable, with education materials subject to checks for accuracy and subject to update and improvement. Such consistent review should be required to secure SSG-accreditation.

The Economic Development Board (EDB) and Enterprise Singapore currently provides funding support for large companies to cover their first sustainability report, which have to be consistent with ISSB's standards. But with over 600 listed companies in Singapore, all of whom will be required to make climate-related disclosures, they will have their work cut out for them.

More can also be done, however, for our small and medium enterprises (SMEs). Workforce Singapore launched a Career Conversion Programme for Sustainability Professionals (CCP-S) in December 2022, aimed at supporting SMEs in their pursuit of sustainability. However, it remains unclear what the take-up rate for the proposed target of 200 CCP-S professionals is and how many of these will be operating out of SMEs.

And unlike multinationals with substantial budgets that they can dedicate to fulfilling such objectives as well as public reputations and reporting requirements to do so, SMEs are often forced to be selective about the aspects of sustainability that they wish to invest time and resources into. Direction on what such firms would focus on will undoubtedly be appreciated and the Government can work on a set of guidelines for priority targets.

SMEs will also need to be able to plan for shifting regulations and community expectations, especially when they venture abroad. Smaller firms do not have the same capacity to tailor their market research to not only the traditional needs of consumers as well as cost constraints, but also environmental and regulatory considerations. Hence, Enterprise Singapore will need to expand the scope to also provide advisory and assistance on how SMEs can best embed sustainability into their overseas ventures.

Just like how we cannot succeed in our climate-mitigation efforts by focusing only on large firms, we, likewise, cannot expect to get to net zero by relying only on public sources of green financing. After all, our public expenditure needs are vast and the investment gap that has to be met by companies adapting to higher carbon prices, even larger.

This is where ESG financing comes into the picture. There is already a burgeoning sustainable finance ecosystem in Singapore, with lending by both private sector financial institutions as well as public sector entities. Green, social and sustainability loans have exploded to $30.4 billion last year from just $3.3 billion six years ago; as has bonds, rising from $1 billion to $7.4 billion over the same period.

By 2030, the Government and statutory boards are expected to issue green bonds that amount to $35 billion, up from $2.1 billion last year. Still, we should not allow the usual hype over ESG financing to eclipse some of the very real challenges on the ground. Some financiers have suggested that there is still insufficient, reliable data on green projects to assure them that corporate actions do not merely account to greenwashing. This reprises the concern that I raised earlier, about the need for high-quality standards for reporting and professionals.

In the medium run, it may be worthwhile exploring whether subsidies for the green transition should always be directly channeled to businesses or whether there is room to do so via responsible financial intermediaries, who will be in a position to scrutinise business activities and ensure that they truly adhere to green best practices.

Some have argued that sustainable projects must entail a "green premium", such that borrowing costs would be higher than the market rate for comparable brown opportunities, with the shift toward ESG-conscious investing, implying that pollutive enterprises now frequently face higher costs of capital, as perhaps they should, if we expect to wean ourselves off such dirty technologies in the longer run. Yet the evidence remains amply unclear as to whether responsible investing must necessarily imply inferior returns.

Mr Speaker, I have offered three practical suggestions for how businesses in Singapore can embrace the carbon transition.

First, we need to broaden the base for carbon taxation, both to include smaller players as well as stages higher and lower in a firm's value chain. Second, we have to monitor our progress with transparent reporting, which, in turn, has to be supplemented by workers with green skills. Finally, the financial sector must play a role in providing the funding to move things along, which they will only be able to do well if they have access to reliable ESG data.

Allow me to close by addressing one of the most common, knee-jerk fears to the pursuit of climate objectives especially held by businesses: that it will raise costs and, hence, undermine competitiveness. This claim, while seemingly intuitive, is, at best, incomplete. While the explanations for why going green may not only be environmentally but also financially sustainable are both complex and multifaceted, the logic can be expressed in a more straightforward manner.

Think about any kind of investment: whether it be in knowledge or the latest technology or even old-school buildings and equipment. These investments always take time before they pay off. Businesses do not set aside earnings for research and development, artificial intelligence or capital expenditure for fun. They do it because they expect, years, perhaps, even decades down the road, they will be in a more profitable position with these investments, than without.

The same can be said for spending on sustainability and green technology. While it may sometimes seem like the money goes directly into a cost black hole, in reality, these are truly investments, which will pay off more in the future.

These may be direct. For example, over the past decade, solar and wind power have become cost-competitive with fossil fuels, even without any financial support. They may also be indirect. After all, if irreversible climate change were to become entrenched, business costs will, themselves, be elevated by higher insurance and other business costs due to natural disasters, as we have observed in countries as diverse as Bangladesh, Mexico, Poland, Spain and Thailand.

In the meantime, any old brown job that is being displaced means new jobs will also, inevitably, be created. While there is no sugarcoating how companies will have to dig into their pockets, at least in the near term, to decarbonise, in the future, they will reap the benefits of their green investments, which will not only be better for their own bottom lines, but also for the only planet that we all inhabit, too. So long as we, as a society and economy, continue to direct technological change in favour of clean, rather than dirty inputs, we will also be able to ultimately realise the dream of sustainable growth for our companies and communities, of course, our children.

Sir, I thank the Member for his Adjournment Motion and Members for staying up until almost 10.30 pm.

Sir, the Government recognises the importance of encouraging all companies to decarbonise while also maintaining our economic competitiveness. This balance is key in every single decision we make to move Singapore towards a low-carbon future.

Amidst international efforts to address climate change, Singapore must and in fact, we will do our part. We have set a clear direction to reach net zero by 2050. To meet our commitment, we must take, as the Member said, bold steps. But we must also pace ourselves carefully, consider global and technological developments and, of course, the impact to our companies and to our people. We have made decisive moves at the national level.

Please allow me to touch on some of these moves.

First, the carbon tax, which the Member raised. The carbon tax is a primary lever in our decarbonisation toolkit. It sends an economy-wide signal to our companies to decarbonise. I thank the Member and the Workers' Party for supporting our carbon tax and note that he had re-emphasised that the carbon tax that we have set is not quite high enough and still below the preferred rate for the Workers' Party.

That said, we must be mindful and careful about the carbon tax rate. In fact, we were the first in our region to implement such a carbon price. Today, the carbon tax targets large direct emitters responsible for about 80% of our total carbon emissions. This coverage is one of the most comprehensive already in the world and it rises to 90%, if you account for excise duties on transport fuels.

We are also striking a delicate balance between covering this final 10% of emissions and the added administrative burden, including of reporting and verification. We need to balance between that as well as the burden to our companies and to our people. The carbon price is scheduled to reach $50 to $80 per tonne of CO2-equivalent by 2030 which is aligned with our international climate commitment and sets a clear direction in our decarbonisation journey.

The Member also talked a bit about our energy mix. Besides setting a price on carbon, we have also intensified our efforts to decarbonise our power grid, which will help all companies address their Scope 2 emissions.

First, we are maximising our use of solar energy, which is the most viable source of renewable energy available to us. Second, as the Member knows, we have raised our ambition to import up to six gigawatts of low carbon electricity by 2035 up from the current four gigawatts. Third, we are exploring nascent low-carbon alternatives, such as hydrogen, geothermal energy and newer, nuclear energies and assessing how they can be applied to Singapore. Minister Tan See Leng talked about that earlier this morning. Fourth, we are also engaging industry players to address demand.

Sir, these moves are important in our green transition. We recognise that companies in this world face both opportunities as well as challenges as we make this transition to net-zero together. First, the opportunities. More large corporates are setting science-based climate targets, including here in Asia.

What does that do? Well, it generates higher demand for clean energy sustainability solutions and carbon credits for those hard-to-abate emissions. It also generates new green growth opportunities in areas, such as offshore wind and carbon services and trading. At the same time, we also acknowledge that companies face challenges to adopt these low carbon alternatives and operations.

For example, they may need to deploy new technology that is probably more expensive and less proven, and make adjustments to their processes with possible downtime in their production. Capital providers and clients are also increasingly demanding that companies report and reduce their emissions. Workers, as the Member mentioned, may also need different skills to take on new or transformed roles. All of these transitions take time.

Therefore, we are supporting our companies at different stages of their sustainability journey, to build capabilities, develop their decarbonisation plans, access financing and to train, upskill and reskill our workers. We are working with our trade associations and chambers (TACs) and financial institutions in this endeavour.

The Member talked about measurement and reporting. This is an important first step for a company to understand its baseline emissions and develop a decarbonisation strategy. Here are some ways we are helping; the Member enumerated some ways too.

Companies under Singapore’s phased climate reporting requirements can get started early on their ISSB-aligned reports, by using the Sustainability Reporting Grant introduced by EDB and Enterprise Singapore, a point made by the Member.

SMEs can also use our SME Sustainability Reporting Programme to prepare their first sustainability reports and this is much more affordably, with the help of appointed service providers. SMEs can also tap the Singapore Business Federation's Emission Factors Registry and the Monetary Authority of Singapore's (MAS') Gprnt to adopt digital solutions to smoothen their carbon accounting and reporting process.

In fact, Gprnt can help an SME automatically translate its day-to-day activities and data from local digital platforms, such as Myinfo Business and Corppass, into a basic sustainability report. With the company's consent, Gprnt can directly share this report with financing and supply chain partners, which will help these SMEs cut down their reporting time and costs.

Beyond that, we are also helping companies as they chart and implement their decarbonisation strategy, working with industry players, such as the Sustainability Alliance, which comprises 18 TACs. TACs, such as the Singapore Logistics Association, have been working very closely with my colleagues at Enterprise Singapore to develop sectoral sustainability playbooks to guide companies on practical, sector-specific steps to the green transition. I launched this playbook with SLA in February.

We also have "Queen Bee" companies, which are important. Companies, such as City Developments Limited and SingPost, are helping their suppliers build capabilities in emissions measurement as well as decarbonisation, to better meet their sustainable procurement criteria.

The Member also talked about financing. Let me touch into funding and financing. The Government provides funding to help companies to implement green initiatives, with higher support levels for SMEs. Companies and SMEs can use the Energy Efficiency Grant and, for larger companies, the Resource Efficiency Grant for Emissions to implement energy efficiency projects and enjoy longer-term energy efficiency gains.

They can also use the Enterprise Development Grant – Sustainability. This is a scheme which provides up to 70% support for sustainability projects, which is higher than for other project categories. Let me give an example.

This particular grant helped a local company called Mlion Corporation to build an innovative B2B steel marketplace for pre-owned construction steel materials. Beyond opening up a new revenue stream, the platform has facilitated the use of pre-owned steel instead of new steel and helping this company, whom I have met before, save about 25,000 tonnes of carbon emissions in its first year. So, by using that, you are already seeing some savings.

Beyond this funding financing is important. So, the Member's point about green finance is key. That is why we are catalysing private green capital to support companies in their transition, leveraging Singapore’s status as a sustainable finance hub.

In fact, as the Member observed, Singapore is ASEAN’s largest market for green, social, sustainability and sustainability-linked bonds and loans, accounting for over half of the ASEAN market.

And local companies can use MAS’ Sustainable Loan Grant and Bond Grant Schemes to obtain green and transition financing and to defray the cost of external reviews to validate the sustainability credentials of such loans and bonds.

We have also recently expanded our Enterprise Financing Scheme – Green, which provides enhanced risk share to catalyse lending to SMEs, with around $350 million in green loans to date.

Enterprise Singapore also recently launched programmes with DBS and United Overseas Bank to offer preferential financing rates for sustainability action, including decarbonisation and green initiatives.

Finally, the Member talked about skills. Companies need talent to drive this low-carbon transition. That is why we are indeed reskilling and upskilling workers to take on these newly created roles.

The Member mentioned the Green Skills Committee, which we launched last year. It is developing skills and training programmes in areas such as sustainability reporting and assurance.

SSG is also working with the Institute of Banking and Finance to extend its accredited sustainable finance courses beyond financial institutions. This is to build sustainable finance capabilities among real-economy companies, particularly our SMEs.

Enterprise Singapore and EDB also recently partnered the Nanyang Technological University to establish the Carbon Markets Academy of Singapore. This will offer courses to train 300 professionals to take on jobs in the carbon services and trading sector over the next three years.

So, there is a comprehensive suite of training. These are examples of how we are preparing our people for this green transition.

Mr Speaker, Sir, it is getting late. And it is really fitting that we close what is likely our last Parliamentary Sitting of the year on this very important issue. Why? Because it concerns the future of our island nation.

Climate change, Mr Speaker, is an existential threat to Singapore. As an island, we are vulnerable to rising sea levels. And as a densely populated tropical city, we are vulnerable to severe heat stress.

On our part, our Government will continue to set clear direction and build an enabling environment for the green transition. We will chart forward-looking decarbonisation pathways and partner industry to build green capabilities. But beyond government and businesses, we all too, as consumers, must also play an important role in this green transition. We could choose low or zero-carbon alternatives in our lifestyles, for example.

Sir, advancing the green transition —