What should I consider before purchasing these bonds?
While the bonds are fully backed by the Government, the prices of long-term bonds, like Green SGS (Infra), are still based on market conditions and can rise or fall before the bonds mature.
For instance, prices will fall if interest rates rise. This means that an investor seeking to sell the bond before its maturity date could suffer a loss on the investment, making it less appealing to retail investors.
In a press release, the Monetary Authority of Singapore (MAS) urged retail investors to review the bond product’s details carefully and assess whether the risk returns and characteristics of long-tenor bonds meet their financial needs.
It added that all investments in Singapore Government Securities “bear market risk”.
Ms Fok said that retail investors may be “less likely to jump on board” as they face challenges in verifying the underlying assets associated with the bonds.
Although the long tenors may also put some retail investors off, long tenors are required for sovereign green bonds, she noted.
“In terms of the retail investors, the tenor of the bond has always been one of the key considerations,” she said.
“It has got to be so long primarily because of the nature of the underlying assets being mainly energy and infrastructure assets, or even transport assets. So (it) … will take some time for assets to actually be completed or even operational.
“However, the other challenge with it being a sovereign green bond, or sustainable bond, is the fact that many of the green benefits will take some time to play out, so that itself in terms of non-tangible returns, or non-financial returns, is something that is not easily measurable and therefore, for individual retail investors, they may find that that is a hurdle.”
While the financial returns of the bonds may not appeal to older investors, the opportunity to leave a legacy might be a selling point for some high-net-worth individuals, Ms Fok added.