1. Distinguished guests, speakers, ladies and gentlemen.
2. Good afternoon, and welcome. It is my pleasure to join you today for this seminar, jointly organized by the Monetary Authority of Singapore and Banque de France, as part of the France-Singapore Joint Year of Sustainability (JYOS) – a year-long initiative to deepen collaboration between our two nations on this existential issue.
3. Since its launch in April 2024, Singapore and France have embarked on a series of collaborations across areas such as the circular economy, renewable energy and sustainable shipping.
4. Today, we are gathered to discuss what it means to build bridges between Climate and Nature in relation to finance. After years of focused attention on addressing the issue of climate-related risk, there is increasing recognition that the loss and degradation of nature represents a similarly significant and interconnected challenge.
Balance
5. Apart from our joint commitment to sustainability, one thing that unites the people of Singapore and France is our love of food. And as all foodies will appreciate, a great sauce never happens by accident. Whether it is a creamy hollandaise sauce or a rich laksa sauce, it is all about keeping the salt, fat, acid and heat in careful balance. If there is too much reduction or too little acidity, a sauce will break. This happens when the fat separates from the water and other ingredients, turning the sauce from a smooth liquid to something oily and curdled.
6. Our natural systems work the same way. Climate, biodiversity, forests, oceans, soil – these are not disparate elements, but interdependent units that work in concert to keep the system stable. Forests are crucial carbon sinks and also critical for sustaining biodiversity and maintaining soil health. Rising temperatures and extreme weather can accelerate ecosystem loss, releasing stored carbon in a negative feedback loop.
7. Cooking is as much art as it is science. You don’t need to get the balance of elements precisely right, as there is a range of tolerance where the ingredients will still come together beautifully. Likewise, maintaining balance in an ecosystem is not about perfection, and more about keeping things within an acceptable range.
8. Unfortunately, our current trajectory will lead us out of that acceptable range. Last month, the Net Zero Banking Alliance voted to relax its rules to allow members to adopt a more flexible goal of keeping warming well below 2°C, as opposed to 1.5°C above pre-industrial levels. The fact is that average global temperatures have already exceeded 1.5°C last year.
9. The change in climate is a key driver of nature loss. Along with other human pressures like land conversion, pollution, and invasive species, ecosystems are degrading faster than they can recover – threatening food, water, and climate stability.
10. The risks arising from climate change and nature degradation are not academic theories – they are manifesting with increasing frequency and severity:
a. Last year, record ocean temperatures driven by climate change intensified Typhoon Yagi
b. At the same time, sustained marine heatwaves triggered the fourth global coral bleaching event, affecting 77% of the world’s coral reefs.
11. Looking ahead, GDP losses in Asia Pacific are projected to reach 16.9% by 2070 under a high emissions scenario, according to the Asian Development Bank.
Challenge of Addressing Nature Risk
12. In 2020, the MAS issued a set of Guidelines on Environmental Risk Management (ENRM). These guidelines will shortly be complemented with additional guidance on transition planning that we had earlier consulted on.
13. Despite references to risks beyond climate, we have taken a climate-first approach as the understanding of best practices to address nature risk is still developing. Singapore-based FIs have made meaningful progress in integrating climate-related risk into their risk management frameworks.
14. In contrast, most financial institutions are still at an early stage of systematically measuring and addressing nature-related risks. This is due to the complexity and diversity of ecosystem services – such as water, pollination, and soil health. FIs have to consider all these elements from a dependency and impact lens as part of their risk assessment.
15. For climate-related risk, a single CO₂ metric – despite all its limitations as a point-in-time measure – allows different stakeholders to have a common point of reference. Measuring nature is much more complicated. One study suggests that up to 3,000 distinct ecosystem services may need classification for effective economic modelling.
16. Nonetheless, we draw inspiration from Victor Hugo, who said that “perseverance (is the) secret of all triumphs”. European FIs – and notably French institutions – are among the most advanced in integrating nature-related considerations into their governance, risk management frameworks, and disclosures. We have much to learn from them.
17. Singapore is also moving forward. Last month, the Singapore Sustainable Finance Association (SSFA) released a whitepaper entitled “Financing Our Natural Capital” to help FIs in Singapore and the region address nature-related risks and opportunities. The whitepaper contextualises global frameworks and tools to the region. This enables FIs to identify sectors with material nature impact and dependencies in their portfolios; and take practical steps to incorporate nature into their business activities. MAS will continue to support the financial sector, through the SSFA, in building capacity to address nature-related risks and unlock financing opportunities.
18. I also commend the Network for Greening the Financial System (NGFS) – in particular its Taskforce on Nature-related Risks – for developing scenarios for nature-related financial risks
Carbon Markets a stabilising force
19. As financial institutions address these risks by adjusting portfolios, engaging clients, and enhancing risk assessments, carbon markets can serve as an additional lever to motivate firms to take action and allow parties to better hedge exposures.
20.From a climate angle, carbon markets provide a price signal for emissions and allow firms to invest in mitigation beyond their immediate operations, even as they work toward internal abatement. From a nature angle, credits from nature-based solutions – such as reforestation, peatland restoration, or mangrove conservation – offer a way to finance conservation at scale. Done well, these projects can deliver both climate mitigation and biodiversity benefits.
21. Demand for high-quality carbon credits is expected to grow. By some estimates, global voluntary carbon markets could grow to 1 trillion USD annually by 2050.
22. While challenges remain amid geopolitical volatility, we are confident in the medium-term growth potential of carbon markets. The finalisation of Article 6 rules at COP29, and the growing acceptance of carbon credits by governments, can lend credence and renew confidence in international carbon markets.
23. Well-functioning carbon markets complement the decarbonisation efforts of firms, while channelling capital into sustainable and often nature-positive projects. They can serve as a stabilizing force, strengthening the delicate balance between climate and nature.
Conclusion
24. In conclusion, just as a great chef watches the sauce, a wise society watches the planet.
25. A chef does not wait for a sauce to break before taking action. Likewise, we cannot wait for ecosystems to collapse before we act. We are already seeing the early signs of deterioration and should not take false comfort that the tipping points have not been breached. A sauce that breaks can be saved in certain circumstances, but not always – so prevention is the better path.
26. Do we continue to stir the sauce and lament that it is difficult to do anything differently? Or do we recognise the risks and take active steps to maintain the delicate balance that we may have taken for granted? Carbon markets will be part of the solution to support the coming transition, and we need more good ideas and courage if we are to make this transition well.
27. Today’s panels will delve deeper into these critical issues. We believe that by working together, we can move beyond short-termism and create a system that is stable, sustainable, and built to last.
28. Thank you, and I look forward to today’s discussions.
*****
[1] Yale Climate Connections (2024). Powerful Typhoon Yagi churns across Northwest Pacific en route to southern China.
[2] National Oceanic Atmospheric Administration (2024). NOAA confirms 4th global coral bleaching event.
[3] Asian Development Bank (2024). Asia-Pacific Climate Report 2024 – Catalyzing Finance and Policy Solutions.
[4] Stevenson et al. (2021). The Practical Fit of Concepts: Ecosystem Services and the Value of Nature.
[5] Network for Greening the Financial System (2023). Recommendations toward the development of scenarios for assessing nature-related economic and financial risks.
[6] Network for Greening the Financial System (2024). Nature-related financial risks: A conceptual framework to guide action by central banks and supervisors.
[7] BloombergNEF (2024). Carbon Credits Face Biggest Test Yet, Could Reach $238/Ton in 2050, According to BloombergNEF Report.
