Low Carbon Investing in Singapore Guide

You probably track your carbon footprint every day, from taking fewer flights to swapping single-use cups for reusable ones.

But have you ever thought about the carbon hidden in your investments?

Most people don’t realise that the companies, funds, or ETFs they own can indirectly contribute to greenhouse gas (GHG) emissions. Every dollar invested can carry an “invisible carbon bill,” shaping not just the planet’s future, but also the financial risks and opportunities in your portfolio.

In this guide, we’ll show you how to measure the carbon in your investments, understand which sectors carry the most risk, and explore practical strategies to reduce your portfolio’s emissions, all while maintaining strong financial performance.

What is a carbon footprint in investing?

A carbon footprint measures the total greenhouse gas emissions generated by an activity. In investing, it refers to the combined emissions of all the companies you own, weighted by how much you invest in each.

Emissions are classified into three categories, called scopes:

• Scope 1 (Direct emissions): Emissions from a company’s operations, such as fuel burned in factories, on-site processes, or company vehicles.
• Scope 2 (Indirect energy emissions): Emissions from purchased energy, like electricity, heating, or cooling. While the company doesn’t produce them directly, it is responsible for them.
• Scope 3 (Value chain emissions): Emissions across a company’s supply chain and product lifecycle, including suppliers, transport, product use, and waste disposal. Scope 3 can account for up to 75% of total emissions, making it the most significant and complex category to track.

Why does this matter? Some funds report low Scope 1 and 2 emissions, but a high Scope 3 footprint could make them far less “green” than they appear. Ignoring Scope 3 means underestimating the real carbon risk in your portfolio.

Which investments carry the highest carbon risk?

Different investments produce different amounts of carbon. Some sectors are historically carbon-intensive, while others are naturally low-carbon.

One interesting local example? The Lion-OCBC Singapore Low Carbon ETF selects 40 Singapore-listed companies with low carbon intensity and excludes fossil fuel firms. This gives investors a way to reduce carbon exposure while staying invested in the local market.

Read more: Beginners’ Guide to Sustainable Investing in Singapore

How to measure your portfolio’s carbon footprint

Measuring carbon in your portfolio is easier than you might think. Here are some tips:

1. Request a carbon report from your fund. Many asset managers provide fund carbon footprint or weighted average carbon intensity (WACI). This shows the estimated tonnes of CO₂ your investments generate per million dollars invested.
2. Check sustainability or ESG reports of companies you hold. Look for Scope 1, 2, and ideally Scope 3 emissions. Compare carbon intensity, for example, emissions per revenue or per unit of production, to evaluate carbon efficiency.
3. Compare your portfolio’s carbon intensity with a relevant index. A higher carbon intensity signals greater exposure and potential financial risk.
4. Understand data gaps and limitations. Scope 3 emissions are often incomplete. Some estimates rely on proxy models using industry averages. Treat the results as estimates rather than exact figures.
5. Track changes over time. Year-on-year trends show whether your portfolio is becoming more or less carbon-intensive.

How to reduce the carbon footprint of your portfolio

Once you understand your portfolio’s carbon exposure, you can take practical steps to reduce it without sacrificing returns:

• Remove or underweight holdings in coal, oil & gas, heavy utilities, and energy-intensive manufacturing (negative screening).
• Allocate more capital to sector leaders with comparatively low carbon intensity.
• Focus on renewable energy, clean technology, electric vehicles, energy efficiency, and carbon capture. These sectors align with decarbonisation trends.
• Use verified carbon credits, reforestation projects, or carbon capture initiatives for emissions you cannot eliminate. Ensure credibility by checking standards and additionality.
• Emissions profiles shift over time. Rebalancing ensures your portfolio remains aligned with low-carbon objectives.
• Many banks offer lower-carbon versions of existing funds, reducing carbon-intensive holdings while maintaining exposure to growth opportunities.

Can low-carbon investing still deliver returns?

Many investors worry that reducing carbon exposure may hurt financial performance. Evidence suggests the opposite may be true:

• Transition risk management: High-carbon assets face losses from carbon taxes, stricter regulations, or reputational damage. Low-carbon investments reduce these risks.
• Growth opportunities: Renewable energy, electric mobility, and climate-focused technologies offer long-term upside.
• Empirical evidence: Studies show that well-constructed low-carbon or ESG portfolios can match or outperform traditional benchmarks.

You do not need to divest entirely from high-carbon assets. A balanced transition approach, combining low-carbon, improving, and transition-aligned holdings, often provides the best mix of financial performance and environmental impact.

Read more: All You Need To Know About Investing with Syfe REIT+

Singapore-specific options for low-carbon investing

Singapore provides growing opportunities for local investors:

1. Lion-OCBC Singapore Low Carbon ETF Tracks 40 Singapore-listed companies with low carbon intensity, excluding fossil fuels.
2. Green finance initiatives Singapore’s Green Finance Action Plan channels capital to sustainable sectors and promotes ESG standards.
3. Corporate decarbonisation and policies Singapore’s carbon tax (currently S$25 / ton CO₂, rising over time) and investments in low-carbon infrastructure make sustainable investing more financially attractive.
4. Encourage Singapore-listed companies to report Scope 1–3 emissions, set science-based targets, and implement decarbonisation plans. Transparent disclosures make it easier to measure your portfolio’s carbon footprint.

Reducing your portfolio’s carbon footprint does not mean sacrificing returns. With careful planning, you can invest sustainably while maintaining competitive financial performance, right from Singapore.

Conclusion

Investing sustainably is no longer a niche concern, it is a smart financial and environmental strategy. Your portfolio carries an invisible carbon footprint that can affect both the planet and your long-term returns.

In Singapore, opportunities abound: low-carbon ETFs, thematic green funds, and supportive government policies make it easier than ever to invest responsibly at home. Even small adjustments, such as tilting towards low-carbon leaders, offsetting residual emissions, or rebalancing regularly, can make a significant difference over time.

Ultimately, low-carbon investing is about taking control of your money and its impact. Every decision you make today contributes to a greener, more sustainable tomorrow, while safeguarding your portfolio against climate-related risks. Start small, measure carefully, and grow your portfolio with purpose.

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