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SINGAPORE has allocated about S$2.1 billion from its green bond proceeds to finance the expansion of its electric rail network – specifically the Jurong Region Line and Cross Island Line – in its 2023 fiscal year ending Mar 31, 2024.

About S$1.7 billion of this sum came from the sovereign issuer’s inaugural offer in August 2022, while another S$400 million was from the S$2.8 billion raised during the second tranche in August 2023, based on the Singapore Green Bond Report for FY2023 released on Wednesday (Sep 25).

With about 14 per cent of the second tranche already portioned out, the remaining sum of about S$2.4 billion is expected to be fully allocated to the two train lines by the end of FY2025, according to the report published by the Ministry of Finance (MOF).

The remaining proceeds have either been temporarily held in a separate cash account maintained with the Monetary Authority of Singapore (MAS) and ring-fenced for other eligible green expenditures, or invested by the Accountant-General’s Department in short-term liquidity instruments, in line with the Singapore green bond framework.

As for the first sovereign green bonds issuance, the total sum of S$2.4 billion raised has been fully allocated. In addition to the S$1.7 billion allocated in FY2023, S$700 million was used for the same purposes in the previous financial year.

The use of these proceeds for the construction of the Jurong Region Line and Cross Island Line was deemed to be eligible green expenditures for clean transportation, and was approved by the Green Bond Steering Committee, which was set up by MOF.

The Jurong Region Line is a 24-km train track that is expected to be completed in 2029, with 24 stations serving the western part of Singapore.

The Cross Island Line is expected to be completed by 2032, and is projected to be the longest fully underground line with over 50 km of train tracks cutting across Singapore when it becomes operational.

There has been debate over the alignment of the track, with nature groups raising concerns about how a particular stretch slated to be built across the Central Catchment Nature Reserve and MacRitchie Reservoir could potentially cause environmental damage.

Nonetheless, the report noted that the development of both train lines will be a key enabler to achieve the goal of significantly reducing Singapore’s land transport emissions. The completion of these lines will expand the rail network to 360 km, and help increase mass public transport peak modal share to 75 per cent, from the current 64 per cent.

Expanding Singapore’s public transport infrastructure and electric rail network is a core element of reducing emissions in the land transport sector – which accounts for 15 per cent of the city-state’s carbon emissions – under the Singapore Green Plan.

Capital expenditures on both projects are also expected to continue to meet the green eligibility criteria for the transport sector, even after the Singapore Green Bond Framework is made to align with Singapore’s taxonomy, a national classification system defining which economic activities qualify for sustainable financing.

The report noted that the proceeds were used in a manner that complied with the eligibility criteria in the Singapore Green Bond Framework, and there were no environmental, social and governance controversies reported within FY2023.

It estimated that both rail lines, when fully running, would likely have prevented between 99,900 and 122,100 tonnes of carbon dioxide equivalent (CO2e) from being emitted annually over the course of its operational lifetime.

This represents an estimated emissions reduction of 81 per cent compared to the baseline scenario where the projects do not exist, and existing as well as future transportations – including private vehicles, taxis and buses – travelling the same distance are not displaced.

That is equivalent to taking at least 22,000 cars off Singapore’s roads.

Financed emissions avoided for the green bond portfolio is estimated to be between 4,700 and 7,100 tonnes of CO2e annually. Based on the S$2.8 billion allocated across two financial years thus far, the avoided emissions intensity is projected to be between 1.7 and 2.5 tonnes of carbon emissions for every S$1 million allocated.

The Singapore government has indicated that a pipeline of up to S$35 billion of sovereign and public-sector green bonds will be issued by 2030. A total of S$12.5 billion has been raised as at the end of FY2023, with S$5.2 billion from MAS, which is acting on behalf of the government, and the rest from statutory boards.

The government has issued another S$2.5 billion of sovereign green bonds in May this year, though these are for a tenor of 30 years, as compared to the first two tranches, which had a 50-year tenor. This sum was not included in the FY2023 green bond report as it had been issued in the current financial year.

The 50-year sovereign green bonds had been priced to yield 3.04 per cent with a coupon of 3 per cent, while the 30-year ones came in with an effective yield of 3.3 per cent and a coupon of 3.25 per cent.