Who pays for a climate-ready Singapore? Navigating the multi-billion bill for adaptation efforts – Asia News Network

Countries were already scaling back on climate action before the conflict in the Middle East further diverted attention away from sustainability, and this drawback could be inching the world closer towards climate catastrophe.

South-east Asia is highly vulnerable to climate change. It faces a medley of risks and hazards like rising sea levels, unbearable heat and extreme weather events intensified by climate change.

The toll is already evident: Beyond lives lost and infrastructure damaged, agriculture and food production are also seriously disrupted.

As vignettes of climate damage inch closer and closer to home – like the devastating chain of typhoons and cyclones hitting the region in late 2025 – a low-lying island city-state like Singapore has to strengthen its guardrails against such threats.

For Singapore, protection is just part of the reason for its adaptation push. The Republic also sees opportunity in this area.

Ms Fu previously told the media that a country’s readiness to adapt to climate calamities has become an increasingly important consideration for businesses looking to invest in Singapore.

Senior Minister of State for Sustainability and the Environment Janil Puthucheary has also pointed out that Singapore can reap economic value from tackling climate impacts, similar to how it is a successful exporter of water technologies.

As climate change impacts countries, and governments start realising the importance of adapting early, investors are starting to sit up and take notice of the growth potential of the adaptation and resilience sector.

The expenditure for climate adaptation and resilience is projected to rise to between US$500 billion (S$642 billion) and US$1.3 trillion a year by 2030, according to a 2025 report by BCG and Singapore’s investment firm Temasek.

Said a spokesperson for Temasek: “The report also found that many climate adaptation and resilience sub-sectors have multibillion-dollar market sizes with strong growth rates, attractive margins, and companies operating at scale – characteristics that aligned well with the investment criteria of private equity investors.”

Hazard warning systems, flood pumps and barriers, as well as emergency medical services, are among the solutions identified by the 2025 report as having the most investment potential over the next five years.

The Temasek spokesperson added that as a long-term investor and asset owner, it recognises that adaptation considerations are important to safeguard existing value, and capture emerging opportunities.

The spokesperson added that Temasek’s portfolio includes investments made into adaptation, such as Canada-based Mastronardi’s controlled-environment agriculture and Keppel’s centralised cooling services, which are more energy-efficient than conventional air-conditioning systems.

The solutions are there. But someone must be willing to pay for their implementation.

The problem is that adaptation has long been seen as the poorer-funded cousin of the other prong of climate action – mitigation, or solutions to reduce greenhouse gas emissions.

Mitigation solutions, which include renewable energy plants, are more attractive to investors because they can generate revenue through the sale of electricity and ensure consistent cash flow.

In contrast, the benefits of adaptation projects like early warning systems are often tied to avoiding the cost of inaction or generating broader societal benefits, said the November 2025 BCG report.

These benefits are challenging to quantify and monetise, making the establishment of adaptation projects less attractive to private capital providers, whose main objective is to secure a return on investment.

According to a 2024 report by think-tank Climate Policy Initiative and the global coalition Cities Climate Finance Leadership Alliance – a coalition of leaders committed to deploying finance for city-level climate action at scale by 2030 – the annual average of urban climate finance in 2021 and 2022, US$831 billion (S$1.067 trillion), was directed to urban climate projects worldwide.

But of that, adaptation projects received just $10 billion. Most of those projects were for the water and wastewater sector.

A paradigm shift is needed among investors and capital providers, so they have a clearer picture of why adaptation initiatives are critical to their bottom lines.

The DBS Institutional Banking Group’s head of sustainable finance Shilpa Gulrajani noted that as the urgency for climate adaptation grows, there is a need to think about how it can be financed.

“Unlike mitigation projects, which typically generate clear and predictable cash flows, many adaptation investments are centred on loss avoidance. This makes them inherently more challenging to finance using conventional approaches,” she said.

She added that applying existing tools to adaptation requires a more forward-looking approach to one that recognises the economic value of resilience, even where returns are not immediately visible.

DBS’ chief sustainability officer Helge Muenkel had told ST on March 12 that the bank has capabilities to assess physical climate risks and will look into turning such data into financial risks to help companies better understand and manage the costs of climate change.

Existing financing instruments for climate projects, such as green bonds, for example, could also be tweaked so they can play a bigger role in mobilising capital to fund resilience projects.

Typically, such green bonds are used to finance activities that have environmental benefits, such as renewable energy projects.

But in October 2025, the Tokyo Metropolitan Government issued a €300 million (S$445 million) bond – the world’s first certified resilience bond – to bolster coastal and flood defences and other climate-related measures.

Ms Makiko Hashiguchi, who was the Tokyo Metropolitan Government’s director of the bond section in the budget division at the Bureau of Finance, said the fund will be allocated to the Tokyo Resilience Project, which is to protect the lives and livelihoods of residents while maintaining the economic functions of Tokyo as the capital that supports Japan.

The resilience project looks at a wide range of risks, including storms and floods, earthquakes and volcanic eruptions, disruptions to power and communications, and the spread of infectious diseases.

Ms Makiko said the funds will be used for six key projects including developing underground reservoirs to prevent flooding caused by heavy rainfall, elevating seawalls to mitigate inundation risks associated with rising sea levels, and enhancing underground utility poles to reduce damage from strong winds.

Noting that such projects often involve long-term infrastructure development, she said that transparency is crucial while managing the proceeds over an extended period to help ensure the credibility of such bonds.

“It is essential to provide clear and consistent reporting to give investors confidence in the instrument,” she said. “Specifically, issuers need to clearly explain how the funded projects are linked to resilience objectives, and to report in a transparent manner on when, how, and to what extent the proceeds have contributed to strengthening resilient infrastructure.”

Growing the pot of money for adaptation will require innovative approaches, financing tools and solutions.

Public funds can handle a longer investment cycle, but private players and banks tend to face shorter investment horizons and have shareholders to be answerable to.

Mr Dave Sivaprasad, managing director and partner at BCG, noted that one model for Singapore is for the Government to kick-start adaptation investments first, before roping in the private sector later.

There have been some developments on this front.

For instance, the Government is spending billions to protect Singapore from rising sea levels through the Coastal and Flood Protection Fund, which can be used to fund the design and construction of coastal protection measures.

But Singapore also recently passed the Coastal Protection Bill, which requires coastal landowners to implement measures against rising sea levels, with penalties for non-compliance.

Ms Fu had said the Government would support the basic coastal protection infrastructure, but that businesses should pay for tailored coastal protection measures suitable for their operations.

Monetising adaptation solutions is another possible way, experts say.

“Wherever you want to mobilise the private sector, you want to be able to have business models and revenue streams you can point to,” said Mr Sivaprasad. “Where you see the most traction for private sector involvement is when solutions come with multiple benefits.”

One example he noted is a dual-purpose tunnel in Kuala Lumpur that is a stormwater drainage system that doubles as a tolled expressway. It not only helps to reduce urban flood risk but also eases traffic congestion, according to the November 2025 BCG report.

The 9.7km tunnel protects urban infrastructure from flood damage with an estimated value of $24 million a year in avoided losses, the report noted.

The revenue from collecting tolls from vehicles funds operations and maintenance while repaying private investment, said the report.

One multi-use solution in Singapore that could bring in money is the future Long Island – three elevated tracts of land double the size of Marina Bay that will be reclaimed off the East Coast to protect the low-lying stretch from rising seas.

The mega-project is expected to create more land for uses such as housing, recreation and commercial developments which can raise the land’s asset value and garner private-sector interest, Mr Sivaprasad.

“When Singapore builds land bank (like Long Island) and can commercialise them with private developers that put in money later, the state can then recover a portion of what it has initially put in,” he said.

Another financing model that holds promise is the use of blended finance – referring to an initial investment from governments or philanthropies to make climate projects more bankable for commercial players to come on board.

In such projects, grants and low-interest loans from philanthropies and governments come in first to soften the risks and prevent losses for private investors. This then makes the projects more attractive for banks and investors since their risks are lowered.

One example of blended finance in climate adaptation is the Climate Investor Two Fund – the largest adaptation infrastructure fund in emerging markets.

Helmed by the Netherlands-based Climate Fund Managers, an investment manager for climate projects, the fund secured US$1.06 billion in late 2025.

This provided the resources to fund water supply and distribution projects in Vietnam and the Philippines, water desalination projects in Thailand and Kenya, among other projects.

Singapore has a national blended finance initiative called Financing Asia’s Transition Partnership (FAST-P).

Its main remit, however, is to help finance climate mitigation in Asia by eventually raising up to US$5 billion from various sources. The three funding pillars of FAST-P are mainly aimed at emission-reducing projects, such as enabling the early retirement of coal power plants and building renewable energy plants.

But the government spokesperson said it could potentially apply to adaptation projects as well.

He said: “While climate adaptation projects that meet the relevant (investment) guidelines can be financed under FAST-P, each investment project will be assessed on its own merits according to these guidelines.”

DBS’ Ms Gulrajani suggested that FAST-P’s emissions-reducing projects can have adaptation co-benefits. For example, resilient infrastructure projects could reduce emissions while strengthening climate resilience at the same time.

While blended finance has been a long-existing financial model, its use in adaptation projects have been limited so far.

According to the UN Industrial Development Organization, only 6 per cent of blended finance transactions were for adaptation-focused deals. Key barriers included unclear revenue streams and perceived risk due to uncertainty in climate projections.

On the potential use of bonds such as the one issued by the Tokyo Government, the Singapore government spokesperson said that the Republic’s public sector green bond issuances are governed by the Singapore Green Bond Framework, which already allows for the use of green bond proceeds for climate change adaptation projects.

These include the construction of climate change resilient infrastructure and flood defence systems.

The Singapore Government will continue to study if such green bonds can be used to finance such infrastructure, based on its development plans and fiscal needs, the spokesperson added.

It could take a while for new financial tools to scale and gain traction.

But companies and organisations should now closely study the climate risks they are exposed to. And these assessments have to go beyond understanding how a company or building will be affected by flooding, said Mr Sivaprasad.

They need to also understand how their supply chains, logistics and raw materials will be affected by intensifying climate hazards such as typhoons elsewhere, and account for workers’ productivity being affected by heatwaves.

“You’re investing and managing under uncertainty, a range of climate projections. The more you understand your risks, the more contingency options you create, the better off you are,” he added.

As Ms Anjali Viswamohanan, director for policy at the Asia Investor Group on Climate Change, said: “The time to invest in adaptation finance is now. Climate risk is systemic risk and the impact of physical risks will only compound and increase in frequency, which underscores the urgency.”