MAS-Led Consortium Develops AI-Powered System to Support Sustainable Finance in Real Estate Sector

SINGAPORE, November 14, 2023 – The Monetary Authority of Singapore (MAS) today announced a Minimum Viable Product (MVP) that can assist banks to tap on Artificial Intelligence (AI) when issuing Sustainability-Linked Loans (SLLs) in the real estate sector. The MVP was developed by the Project NovA! consortium which has concluded the first phase of its work. The NovA! consortium also published a whitepaper which documents the methodology used in the MVP system.

The next phase of NovA! was launched at the Singapore FinTech Festival 2023 today by Mr Tan Kiat How, Senior Minister of State for the Ministry of National Development and Ministry of Communication and Information, who announced the strategic collaboration between MAS and the Building and Construction Authority (BCA) to connect data and services from BCA’s Super Low Energy Building (SLEB) database.

Mr Sopnendu Mohanty, Chief FinTech Officer, MAS, said, “The collaboration between MAS and BCA marks a transformative phase in both green finance and sustainable building, accelerating our industry towards achieving their net-zero targets. NovA! creates a transparent and effective environment that combats greenwashing and directs finances towards truly sustainable projects.”

The first phase of Project NovA! focused on addressing key challenges faced by banks in extending SLLs:

inaccurate settings for Sustainability Performance Targets (SPTs) due to data scarcity and inconsistency;

greenwashing concerns which affect about 50% of SLLs; and

inefficient processes leading to manual errors in reading and interpreting disclosures from lenders

Mr Ang Kian Seng, Group Director of Environmental Sustainability at BCA, added, “In this collaboration, we’re leveraging MAS’ AI capabilities to drive a data-centric approach to sustainability, which not only helps improve building standards but also advances green financing for the Built Environment sector’s decarbonisation goals. This partnership is a critical step towards meeting Singapore’s net-zero and Singapore Green Building Masterplan targets.”

Three core features in the AI-powered MVP developed in phase one of Project NovA! will help banks address the above challenges:

Facilitate setting performance targets for SLLs in real estate sector through peer and industry benchmarking. By harnessing data from government sources and conducting property-specific peer and industry comparisons, AI technology can be used to help banks set Key Performance Indicators (KPIs) judiciously and establish practical SPTs, to enable a more accurate sustainability assessment.

Monitor against selected KPIs/SPTs to curb greenwashing. By using buildings’ energy consumption data on a continuous basis at-source4, NovA! enables banks to compare borrowers’ current sustainability performance with the agreed SPTs on a more timely basis. Risk assessment teams from banks can swiftly identify discrepancies, ensure SLLs maintain their intended impact, and curb greenwashing.

Enhance processing sustainable finance transactions through Autonomous Documentation Insights Engine (ADIE). This feature utilises Natural Language Processing to enable banks’ relationship managers, KYC teams, and sustainable finance units to extract sustainability insights, such as a company’s total greenhouse gas emissions, swiftly and accurately from diverse sources. This is a shift away from manual processing of disclosure documents, allowing for more informed decision-making based on comprehensive data extracted from borrower disclosures.

In the next phase, MAS will collaborate with BCA to tap on BCA’s SLEB database, to enable NovA! to access country-wide data on green buildings. This will help banks to identify prospective green building projects, achieve real-time SPTs monitoring, and accelerate green financing within the real estate sector. NovA! will also extend its AI capabilities to support sustainable financing in other sectors such as power and manufacturing industries.