“Lifting all boats – Finance, Philanthropy, and Innovation”

Distinguished guests
Good afternoon.

Thank you for having me here today. I am grateful that UBS has given me this opportunity to join you for this showcase on accelerating decarbonisation through blended finance and transition in action. 

It was John F. Kennedy who coined the phrase “a rising tide lifts all boats”. While, over the years, many have turned to this idea as evidence of the positive societal effects of strong economic growth, President Kennedy’s statement was an aspiration, not a promise.

The tide is indeed rising.

• The latest Capgemini World Wealth Report highlights a 7.8% increase in high-net worth individuals in 2021.
• In Asia, the number of millionaires is set to double by the end of the decade, from roughly 30 million to over 76 million.

But the tide is rising unequally and not all boats are being lifted. Growth has been uneven, and this gap has only widened over the past decade.

• We know from the work undertaken by the World Inequality LabChancel, L., Bothe, P., Voituriez, T. (2023), “Climate Inequality Report 2023”, World Inequality Lab Study 2023/1 that the top 10% emitters of the world account for almost half of global carbon emissions, and own 76% of the world’s wealth.
• The lowest 50% emitters of the world, on the other hand, account for only 12% of global emissions, own 2% of the world’s wealth, and yet have to bear a whopping 75% of climate-related income losses.

At the same time, the waters we find ourselves in are getting more choppy. We are dealing with persistently elevated inflation, increasing geo-economic fragmentation and geopolitical contestation. 

With the need to search for growth, ease tight labour markets, secure price and financial stability, ensure energy security and develop food resilience – the crew in government and national vessels have their hands full. We are truly, in the words of Senior Minister Tharman Shanmugaratnam, in the perfect long storm.

And these government vessels are in need of repair. Fiscal positions are tighter and public debt has increased significantly, given challenging economic conditions, recent recessions and the COVID-19 pandemic.

At the same time, sea levels are rising and we are experiencing extreme weather conditions.

• We know from the latest IPCC AR6 Synthesis Report that 1.1°C of global warming has already caused substantial damage to food and water security and led to fatal extreme heat events.
• The same report stated that the damage to ecosystems will increasingly become irreversible as we approach the 1.5°C threshold.
• We are already feeling the heat here in Singapore – the island is warming up twice as fast as the rest of the world at 0.25°C per decadeMeteorological Service Singapore (n.d.), “Past Climate Trends”, Retrieved 4 June 2023, from http://www.weather.gov.sg/climate-past-climate-trends/.
• Just last month on 13 May, temperatures here hit a record 37°C, revisiting a 40-year record last reached in 1983 for the highest daily maximum temperature.

Our global energy mix remains heavily reliant on fossil fuels which accounted for about 80% of total primary energy consumption last yearBP (2023), “bp Statistical Review of World Energy 2022 71st edition”..

And the problem is only compounded by the fact that the consumption of fossil fuels, in absolute terms, is likely to rise as more energy is needed to fuel our growing global economy.

It takes a brave sailor to navigate these waters, but I see in this room many such courageous souls. The question is not whether you will come oboard the ship, but where we should focus our energies. Let me highlight three points that should give us some hope.

First, finance is a critical and powerful enabler for the transition to a sustainable future, and financing patterns are shifting in the right direction. 

We know from work done by McKinsey that US$9.2 trillion in annual investment is needed to achieve net zero by 2050. We also know that we are 35% (or about US$3.5 trillion) short of this figure.McKinsey & Company (2022), “The net-zero transition – What it would cost, what it could bring”. 

No one wants to be US$3.5 trillion short of anything, but we are starting to see promising trends in capital being directed to green and transition investments.

The second point I want to make is that philanthropic capital can make an outsized contribution towards closing the financing gap. 

A key challenge in Asia is the lack of shovel-ready transition projects.

Private capital may be unable to invest in climate-related projects that are below their risk-return targets due to their fiduciary duty and mandates. 

This is where flexible and risk-tolerant philanthropic capital can bridge the gap.

This is not a theoretical construct. We have seen real life examples.

On this issue of philanthropy, engagement levels are high, but contribution levels can be improved.

This brings me to my third point – which is that what is needed from philanthropic capital is not a “spray and pray” approach.  Instead, given the challenges I have outlined, we need philanthropic capital that is innovative, targeted and razor-focused on de-risking for maximum impact. 

Specifically, what is needed is the willingness to deploy philanthropic capital in strategic, impactful ways that de-risk and alter the risk/return calculus for commercial investors.

On this front, I would like to highlight the Asia Climate Solutions (ACS) design grant initiative by Convergence Blended Finance, which MAS has supported.

Finance, Philanthropy, Innovation – all key themes as we navigate a way forward and seek to lift all boats, however challenging this may be. 

I know the distinguished panelists that follow me will cover some of these perspectives in greater depth, and I wish you fruitful discussions this afternoon.