Impact investing has been gaining significant interest in Singapore in recent years. As a financial hub with strong government support, Singapore has cultivated a vibrant ecosystem for impact investing. However, the market remains relatively small and faces several challenges. This article reviews the current state of impact investing in Singapore, including key developments, opportunities and limitations.
Government initiatives catalyze growth of impact investing in Singapore
The Singapore government has been actively promoting impact investing through various initiatives. Notably, the Stewardship Asia Centre was launched in 2016 to serve as a knowledge and networking platform. The centre has organized conferences, courses and workshops to raise awareness. In 2020, the Monetary Authority of Singapore published a guide to accelerate the growth of the impact investing sector. Government grants and incentives have also been introduced to facilitate the flow of capital.
Singapore emerges as a hub for Southeast Asia impact investments
With its strategic location, business-friendly environment, and robust financial system, Singapore acts as a gateway for global capital targeting impact investments in Southeast Asia. Singapore-based impact investors are able to effectively identify and execute deals in the region. However, Southeast Asia’s impact investing market remains fragmented and relatively difficult to navigate.
Lack of exits and small deal sizes pose challenges
While the impact investing industry has grown, Singapore’s market is still small with a limited number of suitable deals, especially for large institutional investors. Moreover, there are very few exit opportunities for impact investments in Singapore. Hence, investors may find it difficult to recycle capital for subsequent investments. The small deal sizes also make it challenging for fund managers to construct diversified portfolios.
More impact measurement and structured products needed
There is a need for more standardized impact measurement tools and reporting frameworks. Impact investors also hope to see more structured impact investing products emerge such as social impact bonds. Nonetheless, the impact investing market in Singapore holds much promise and will likely continue on its growth trajectory.
In summary, impact investing has gained increasing traction in Singapore owing to strong government support and private sector interest. However, the market remains small and illiquid. More work is needed to address bottlenecks and facilitate the flow of capital into impactful projects.