What should I pay attention to before buying these bonds?
Although the bonds are fully backed by the government, the prices of long-term bonds, such as Green SGS (Infra), are still based on market conditions and may rise or fall before the bonds mature.
Prices will fall if interest rates rise. This means that an investor who wants to sell the bond before maturity could incur a loss on the investment, making it less attractive to retail investors.
In a press release, the Monetary Authority of Singapore (MAS) urged retail investors to carefully review the details of the bond product and assess whether the risk return and characteristics of long-term bonds meet their financial needs.
It added that all investments in Singapore Government Securities “involve market risk”.
Ms Fok said retail investors are “less likely to jump on board” as they face challenges in verifying the underlying assets linked to the bonds.
While the long maturities may also deter some retail investors, long maturities are required for green government bonds, she noted.
“As far as retail investors are concerned, bond maturity has always been one of the most important considerations,” she said.
“It has to take that long, mainly because of the nature of the underlying assets, mainly energy and infrastructure assets, or even means of transportation. So (it)…will take some time for assets to actually be completed or even operational.
“However, the other challenge with being a sovereign green bond or sustainable bond is the fact that many of the green benefits will take some time to work out so that they themselves in terms of intangible returns or not -financial return, is something that is not easily measurable and therefore individual retail investors may find that a barrier.”
While the financial returns of the bonds may not appeal to older investors, the ability to leave a legacy could be a selling point for some high-net-worth individuals, Ms. Fok added.