ESG policy could be Singapore’s next big export

The way I see it, Singapore has been practising best-practice ESG long before the term was coined in 2006.

In terms of the environment, we’ve had to manage rapid industrialisation and economic development while maintaining a sustainable environment. We developed and keep developing policies that ensure clean air and clean water. The idea of Singapore as a “Garden City” has been around since 1967 – not long after independence. We’ve constantly been grappling with the trade-offs between growth and environment.

In terms of social obligations, Singapore has literally built a history of social policy innovations – like a public housing system in which Singaporeans enjoy one of the world’s highest home ownership rates, with relatively affordable prices and adequate living spaces. We don’t often hear Singapore described as such, but it’s been in many ways a very socially progressive state.

And in terms of governance, Singapore was the first country in all Southeast Asia, if not East Asia, to eradicate corruption. Even now, it remains one of the most transparent countries in the world, with a robust legal system that gives overseas companies confidence to operate and headquarter here.

In other words, Singapore’s successes in ESG are not just on paper. It has a track record of policy successes which can become the basis of a new growth industry.

Yes, and I would say this idea isn’t a new one. Even in the early 2000s, there was talk of Singapore exporting what we called its “governance software”, the systems and processes that enable sound policymaking and effective implementation. What we’ve seen more recently, with the whole ESG movement gathering momentum, is that there’s now not just excitement, but also economic demand for this kind of expertise.

I still hear older policymakers and business leaders talking about ESG in woeful terms, as bringing about all these constraints for the state and private enterprises. Of course, ESG will impose more constraints on Singapore: the additional compliance costs from our Extended Producer Responsibility schemes are one example. But I feel it’s much more productive – and accurate – to focus on the opportunities that ESG will create, like attracting substantial green investment to the country. Singapore is already a thought leader and an exporter of ESG and ESG-related services in areas like green finance and corporate governance; and can become a standards-setter for ESG goals and metrics.

And over time, there’s going to be a great deal of demand for that – because global investors and consumers expect that firms operate with certain obligations and responsibilities to society. We should see this as an export opportunity, rather than a threat.

I would say we need to find a new, more sustainable balance between economic efficiency and social equity. When you get to Singapore’s level of prosperity and per capita income, the focus can shift from growth to equity and stability. It doesn’t mean growth is no longer a priority – it is. But we now need to maintain our standards of living, and just as importantly, try to improve on the distribution of equity and opportunity.

We know from looking at global markets that without the tempering force of government interventions, growth often can be unequal and cause disruption for certain groups. The correct policy response isn’t to hold back that growth. Instead, we should channel some of it to the groups that wouldn’t otherwise benefit as much. Recent moves to address wage inequity amongst certain professions are encouraging in that respect. I would go as far as to say that achieving growth is less challenging than achieving social equity, which is exactly why we ought to face it head-on.

At the same time, we need to shift our thinking away from simply increasing inputs to remain competitive as a nation. Take attracting top talent to our shores as one example. Talent inflows play a big part in our competitiveness, but we can sometimes get fixated on bringing in these talents and, in doing so, forget to capitalise on areas that we’re truly good at, like robust governance and efficient processes. Tapping into demand for sunrise industries like ESG – creating our own niches – is one example.

We have all these great policy successes: great public housing, a well-designed health and education system, a great airport and port, long-term urban planning. It’s logical that we parlay these capabilities into exportable services and economic growth.