SINGAPORE

Looking Back: 2023 and Gazing Into: 2024

Looking Back: 2023

In October 2022, Singapore announced that it will raise its national climate target to achieve net zero emissions by 2050 and to reduce emissions to 60 million tonnes of carbon dioxide equivalent (MtCO2e) in 2030 after peaking emissions earlier. 

These commitments aim to help attain the Paris Agreement goals of controlling the rise of global temperature. At least US$2.5 trillion is required each year until 2030 to meet these goals. In addition to green finance, transition finance is much needed to support a sizeable number of businesses and sectors in the region that are brown or less green to become green or greener over time. 

To mobilise capital for Asia's transition, the Monetary Authority of Singapore ("MAS") launched the Finance for Net Zero Action Plan. The Singapore Exchange (SGX) has also highlighted the potential of Sustainability-Linked Bonds ("SLBs") as a form of transition finance and addressed concerns about credibility of these instruments.

Apart from the public sector, the private sectors as well as community and individuals play a role in Singapore's decarbonisation journey. The following key legal and regulatory initiatives were put in place to prompt all players to contribute to this journey:

• Guidance on credible climate transition plan for issuers listed on the Singapore Exchange Securities Trading Limited (SGX-ST);

• Sustainability standards for data centres;

• Legal framework for safe charging of electric vehicles ("EVs"); and

• Legislative changes to help reduce packaging and food waste.

The advent of ChatGPT in late 2022 has accelerated the evolution and use of artificial intelligence ("AI") and generative AI. AI will undoubtedly reshape how we live, work and play. Acknowledging the importance of responsible development and deployment of AI technologies and solutions, Singapore regulators have rolled out the following initiatives:

• AI Verify Foundation by the Infocomm Media Development Authority ("IMDA") to develop AI Verify testing tool for the responsible use of AI;

• Generative AI Evaluation Sandbox by IMDA and AI Verify Foundation; and

• Veritas Toolkit version 2.0 by MAS to enable the responsible use of AI in the financial industry.

As the global economy becomes increasingly driven by innovation and intangibles, the value of an enterprise is no longer limited to tangible assets. Cognisant of this shift, Singapore has taken the step to develop and launch an intangibles-specific disclosure framework.

With more cryptocurrency platforms in Asia facing financial challenges, Singapore positions itself as the restructuring jurisdiction of choice. The Singapore courts have demonstrated that Singapore's restructuring and insolvency framework is equipped to deal with the restructuring of cryptocurrency companies, despite the unique challenges presented by such companies. Singapore courts also recognise the enforceable property rights of crypto assets. 

The digitalisation of trade has been the subject of increasing focus, with accelerating developments in both the technology and the legal framework required to support the necessary transformation. In this regard, Singapore positions itself as a leader in trade digitalisation by successfully executing the world's first fully paperless, live cross-border trade via the Electronic Transferable Record. The Trade Finance Registry was launched as a centralised record of trade finance transactions in Singapore to mitigate the risk of duplicate financing for the same underlying trade.

Economic sanctions have become a powerful and frequent political instrument for governments to achieve foreign policy objectives. However, the Singapore Court of Appeal's decision in Kuvera emphasises that principles governing contractual interpretation take precedence notwithstanding the geopolitical significance of sanctions.

Other key legal and regulatory developments to note include:

• New Code of Practice that requires designated Social Media Services to enhance online user safety and curb the spread of harmful content on their service;

• Hague Service Convention taking effect in Singapore to offer simplified mechanism for cross-border service of judicial or extrajudicial documents;

• Tax Exemption Schemes for Single Family Offices updated to bolster the development of wealth management industry;

• New regulatory framework for collective management organisations for copyright owners;

• New anti-money laundering and countering of terrorism financing ("AML/CFT") measures for property developers;

• Additional Buyer's Stamp Duty ("ABSD") for the sale and purchase of residential property raised to promote a sustainable property market; and 

• New business conduct requirements for corporate finance advisers. 

Gazing Into: 2024

The meteoric rise of generative artificial intelligence ("Generative AI") has been one of the loudest headlines in 2023, with the initial hype quickly translating into real-world impact. The "Proposed Model AI Governance Framework for Generative AI" issued by the AI Verify Foundation and Infocomm Media Development Authority ("IMDA") on 16 January 2024 acknowledges that while Generative AI "holds significant transformative potential, it also comes with risks". 

The Proposed Framework seeks to set forth a systemic and balanced approach to address Generative AI concerns while continuing to facilitate innovation. This has been Singapore's approach in adopting generative AI or AI solutions. The National AI Strategy 2.0 was launched to introduce key shifts to propel Singapore as a leader in the AI field as Singapore sets sight on developing Southeast Asia's first large language model ("LLM") ecosystem.

Alongside these innovations, the Monetary Authority of Singapore ("MAS") is collaborating with the financial industry and technology partners to develop a risk framework for the responsible use of Generative AI for the financial sector. In addition, the Personal Data Protection Commission ("PDPC") proposes to issue new Guidelines governing the use of personal data by organisations to develop and deploy AI systems that embed machine learning. 

Singapore and ASEAN are continuing their efforts systematically to attract green investments in Singapore and the region with an aim to deliver each Southeast Asian country's climate goals. In December 2023, Singapore launched the Singapore-Asia Taxonomy for Sustainable Finance that focuses on phasing out coal-fired power plants. The ASEAN Taxonomy for Sustainable Finance is expected to be updated in Q1 2024 to help the ASEAN region advance our sustainable finance agenda. The uniqueness of both the Singapore and ASEAN Taxonomy is the inclusion of transition activities and the use of a traffic light-based system in supporting companies in their transition journey. These could catalyse the much needed funding in projects that encourage decarbonisation by reducing dependence on coal power in the region. 

Within the Southeast Asia region, Singapore is currently the only nation with a carbon tax regime in place. Changes to the Carbon Pricing Act 2018 took effect on 1 January 2024 to support an effective carbon tax regime by introducing the concept and value of carbon credit and enabling the implementation of the International Carbon Credit ("ICC") Framework.

Other key developments in the pipeline that will drive environmental, social and corporate governance ("ESG") investments in 2024 and beyond include:

• Proposed Guidance Note to specifically address how businesses can collaborate to achieve environmental sustainability objectives without breaching competition laws. ·  New digital platform that will allow seamless reporting of and access to ESG data.

• New Code of Conduct for ESG rating and data product providers to provide assurance on the reliability and independence of ESG rating and data products.

• Proposed mandatory climate reporting requirements on companies listed on the Singapore Exchange Securities Trading Limited ("SGX-ST") and large non-listed companies.

• Proposed Guidelines on Transition Planning for banks, insurers and asset managers.

• New platform leveraging on AI and data analytics that will support sustainable finance in the real estate sector.

• New Guidelines to address concerns on greenwashing conduct.

MAS continues to progressively implement regulatory measures on consumer protection for digital payment token service providers in 2024 with the objective of making Singapore's regulatory regime one of the strictest in the world in governing retail access to cryptocurrencies. 

Complementing this effort, Singapore is committed to implementing the Crypto-Asset Reporting Framework ("CARF"), which will enhance the global system of automatic exchange of tax relevant-information on crypto-assets to detect and deter tax evasion.

Distinguishing stablecoin from cryptocurrencies, MAS is of the view that stablecoins, if well regulated, can potentially play a useful role as digital money. Therefore, MAS is deveoping a rigorous regulatory framework for stablecoins regulated in Singapore.

The ASEAN Economic Ministers has launched the negotiations on the ASEAN Digital Economy Framework Agreement which is projected to double the regional digital economy from US$1 trillion to US$2 trillion by 2030.

As more commercial transactions and financial exchanges move to digital platforms, the security of transactions is paramount. With the proliferation of scams and malicious cyber activities, the Online Criminal Harms Act which has been passed but is not yet in force will, among other things, require designated online services providers to put in place systems and processes to counter scams and malicious cyber activities. Further, MAS and IMDA propose to implement a Shared Responsibility Framework that would impose anti-scam duties on financial institutions ("FIs") and telecommunication operators.

In addition, the following key trends or developments are to be noted:

• A new Significant Investments Review Act will be enacted to subject entities that are critical to Singapore's national security interests to ownership and control requirements.

• A new electronic information sharing system named Collaborative Sharing of Money Laundering / Terrorism Financing Information & Cases ("COSMIC") will be set up to enable the disclosure, publication and sharing of risk information between prescribed FIs to more effectively prevent and deter money laundering, terrorism financing and proliferation financing.

• It is proposed that the Cybersecurity Act 2018 be amended to, among other things, safeguard entities in charge of key digital infrastructure (other than Critical Information Infrastructures) by increasing oversight over their cybersecurity and requiring compliance with minimum standards. Such entities may include cloud service providers and data centre operators.

• A new Workplace Fairness Legislation will be enacted to protect workers who are facing challenges due to discrimination.

Full Report

Click on the link below for the full report which provides summaries of the key legal developments related to the above areas.

• Regional Round-Up 2023: Singapore

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