[SINGAPORE] One Saturday after the Johor Bahru-Singapore Rapid Transit System (RTS) Link opens, a family in Woodlands will leave home after breakfast without first checking the Causeway cameras for congestion. 

At Woodlands North they will clear immigration, cross the Strait of Johor in minutes and step out at Bukit Chagar in the middle of Johor.

By lunchtime, they are pushing a trolley through a supermarket, picking out groceries at prices that, until now, lay half a day away.

They pay for their goods, collect a prescription for a fraction of what it costs at home and are still back in time for dinner. 

For the grocer in Marsiling, the same Saturday ends with one fewer basket through the till. 

A study jointly commissioned by the Singapore Business Federation, Restaurant Association of Singapore and Singapore Retailers Association estimates that Singaporeans will spend an additional S$1.05 billion a year in Johor, once the trains begin running.

Visitors from Johor are expected to spend S$756 million more here, leaving a net outflow of about S$290 million. 

That figure will understandably worry retailers. But it measures where money is spent, not whether Singaporeans are better off. 

Nor do spending figures capture how the RTS may affect productivity, employment and the market available to Singaporean companies. 

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When a household buys the same goods for less, its purchasing power rises.

The RTS should therefore be judged not by how much spending will leave Singapore, but instead by whether it raises output and real incomes. 

A regional ecosystem

The Causeway has never carried only shoppers. Every working day, it moves tens of thousands of commuters from Johor towards higher-paid work in Singapore, alongside freight between Johor’s factories and Singapore’s ports. 

The connection makes two complementary economies, separated by only a few kilometres, a few hours apart.

Singapore has limited space but strong capabilities in finance, logistics and professional services, while Johor offers cheaper land, a larger workforce and more room for industrial expansion. 

At the Asia Competitiveness Institute, our research treats Singapore and the Malaysian Peninsula as an interconnected economy linked by trade, services and migration. 

Our study of the Johor-Singapore corridor finds that the RTS could raise Singapore’s gross domestic product by about 1.8 per cent, even without the effects of the Johor-Singapore Special Economic Zone.

By reducing the effective distance between the two economies, it changes how workers, companies and demand move in the wider region. 

In the labour market, a larger shared pool allows Singapore companies and Johor workers to find each other more easily.

The bigger shift, though, is on the demand side. A more integrated corridor makes Johor more attractive to Malaysians because of increased opportunities. 

In our simulation, the RTS raises Johor’s population by 2.3 per cent, enlarging the corridor market and lifting demand for Singapore’s banking, insurance, logistics and specialist expertise. 

These changes affect how much Singaporeans can buy with their income.

Our model estimates a modest real income gain of 0.1 per cent for the average person living in Singapore, reflecting cheaper purchases in Johor and stronger demand for Singapore-produced services from a growing market across the Causeway. 

This is often missed in a narrow debate about spending leakage. Money spent in Johor is easy to see, but improvements in Singaporeans’ welfare and living standards are not.

Micro pain, macro gain

Despite all that, the gains will not be evenly felt. 

Grocers, pharmacies and restaurants which sold easily substitutable goods at higher prices and counted on long queues at the Causeway to keep cheaper rivals out of reach may lose customers, particularly in northern Singapore. 

The benefits of integration will be spread widely, while the costs will be concentrated among particular businesses and workers. 

That asymmetry is the difficult political challenge of the RTS. 

Keeping residents shopping at home through vouchers or subsidies may be tempting. Yet, measures that discourage them from acting on price differences erode the welfare gains that justify the project. 

The better response is to help exposed businesses adapt through better service, more unique products and greater convenience, while giving displaced workers retraining linked to actual vacancies and support in finding new jobs.

Singapore’s advantage has never been about competing on price alone. It lies in offering quality, reliability and specialised strengths. 

RTS as the greater good 

By the time the family from Woodlands is back at their own table, the RTS would have run all day in both directions.

It would have carried workers to better-paid jobs, linked companies to customers they could not reach before and let households stretch their money a little further on either side of the Strait of Johor. 

What looks like a loss from one shop counter might actually be, across the whole island, many households paying less for the things they need, Singapore companies drawing on a larger cross-border labour pool and a growing neighbour buying more of what Singapore does best. 

The grocer in Marsiling counts a quieter till. It is an undeniable cost to someone’s livelihood.

But over time, as the corridor grows and trade across the border strengthens, the wider gains should reach far more people.

Adam Romzi is a research analyst and Song Yunlong is a research fellow. Both are at the Asia Competitiveness Institute.

[SINGAPORE] Some shareholders of Great Eastern : G07 +1.7% (GEH) who resisted OCBC’s attempt to fully acquire and delist the insurer two years ago may have felt vindicated by the strong financial numbers it reported last week, and by the big run in its share price over the past month.

Before the market opened on Friday (Jul 31), GEH said its profit attributable to shareholders jumped nearly 103 per cent in Q2 2026 to S$503.2 million. This brought its H1 2026 profit attributable to shareholders to S$849.5 million, up more than 43 per cent versus H1 2025.

Total weighted sales were up 13 per cent to S$411.3 million in Q2 2026, and up 15 per cent to S$813.2 million in H1 2026. New business embedded value increased 25 per cent in Q2 2026 to S$209.9 million, and 28 per cent in H1 2026 to S$405.3 million.

GEH said it will pay an interim dividend of S$0.35 per share. For 2025, it paid an interim dividend of S$0.25 per share, and a final dividend of S$0.30 per share.

GEH’s shares closed on Friday at S$21.78 – up 6.9 per cent for the week, and up 34.6 per cent since the beginning of July.

With this recent surge, GEH shares have delivered a total return of 150.5 per cent since OCBC’s offer back in May 2024. OCBC’s own shares have returned 135.4 per cent during the same period, while the Straits Times Index has returned 90.7 per cent.

With a market capitalisation of S$20.6 billion, GEH is now also among the largest stocks on the Singapore bourse – approximately the same size as Keppel and CapitaLand Integrated Commercial Trust, which have market caps of S$20.7 billion and S$19.2 billion, respectively.

Will GEH keep rising? How much higher can it climb?

Heightened investor interest

One theory for GEH’s run over the past month is that the market was anticipating the strong financial numbers that it reported last week. If GEH’s performance is sustained in H2 2026, it could end the year with a significantly higher embedded value and comprehensive equity – two financial metrics commonly used to value insurers.

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GEH reported an embedded value of S$20.1 billion at end-2025, and comprehensive equity of S$15 billion.

An alternative theory is that the heightened investor interest in GEH over the past few weeks was sparked by Allianz’s purchase of HSBC Life Singapore turning the spotlight on the potential value of Singapore-based insurance players.

On Jul 24, Allianz said it will pay a total consideration of two billion euros (US$2.3 billion) or S$2.9 billion to HSBC. Of this, S$2.7 billion is for the acquisition of HSBC Life Singapore, while the remainder is for a 15-year exclusive deal to provide HSBC’s customers in Singapore with protection, health, retirement and wealth solutions.

It added that HSBC Life Singapore generated an operating profit of 80 million euros in 2025, and had comprehensive equity of 1.2 billion euros.

Another theory for GEH’s rally over the past month is that it has benefitted from a rotation towards less-liquid, value-oriented stocks as valuations have become increasingly stretched among other larger cap stocks.

More dividend driven gains?

Whatever the case, GEH could well continue climbing over the next couple of years – as its growing insurance business supports higher dividends, in my view.

GEH has stated that it aims to pay dividends twice a year, with each dividend amount no lower than the preceding one. It noted last week that its latest interim dividend of S$0.35 per share is 17 per cent higher than its final dividend for 2025.

Even if GEH maintains its final dividend for 2026 at S$0.35 per share, that would translate to a full-year dividend of S$0.70 per share – or a yield of 3.2 per cent, based on GEH’s current share price.

However, investors should keep in mind that OCBC treats GEH as an integral part of the group, and it has indicated that it would rather the insurer were not listed. Indeed, GEH has a longstanding practice of remunerating its employees with OCBC shares rather than GEH shares.

Under the circumstances, it seems most unlikely that the value of GEH will ever be crystallised through a sale to a third party, as HSBC is doing with its Singapore insurance business.

GEH’s board is also unlikely to take any steps to widen the insurer’s free float – which stood at 11.8 per cent in March.

Accommodate more activism

To be clear, I am not suggesting that OCBC was wrong for wanting to fully acquire and delist GEH. However, this strategic objective should arguably have been pursued in a manner that gave greater weight to the interests of GEH’s minority shareholders – especially as some of those minority shareholders had begun adopting an activist stance during the weeks leading up to OCBC’s offer in May 2024.

In light of the strong returns GEH shares have delivered, it now appears that those minority shareholders had the right instincts.

The important role that minority investors can play in unlocking shareholder value has not been lost on the architects of the Singapore market’s current revitalisation. Institutional investor participation is being fostered through the S$6.5 billion Equity Market Development Programme (EQDP).

Locally listed companies are also being encouraged to build up their capabilities in corporate strategy, financial management and investor relations through the S$30 million Value Unlock scheme.

Yet, engaging with companies and pushing them to unlock value can be a difficult and disagreeable task for minority investors when their interests are fundamentally misaligned with those of controlling shareholders.

This column suggested last month that part of the solution may lie in providing minority investors with practical ways to seek legal redress. There may also be room for the rules related to general offers, delistings and free floats to be adjusted, in order to reduce the likelihood of lengthy trading suspensions being a factor in minority investors accepting lowball offers.

More importantly, the Monetary Authority of Singapore (MAS) and the Singapore Exchange should seek to make responsible shareholder activism more culturally acceptable in the local market.

For instance, they could require fund managers that have received EQDP funds to publicly disclose their voting record at shareholder meetings. These disclosures might result in fund managers voting more carefully, and influence the thinking of retail investors on matters such as board compositions and interested party transactions.

MAS could also modify its Grant for Equity Market Singapore scheme to specifically allocate funding for research designed to challenge and effect change at the boards and senior management ranks of underperforming companies.

By developing such analyst talent in Singapore, perhaps the day will come when activist investors will not be viewed as a bunch of troublemakers but a crucial part of a well-functioning market ecosystem.

AFTER the US-Iran memorandum of understanding was signed in June, many leapt for joy. But the last few weeks – during which Iran and the US restarted armed conflict – have underlined that the crisis, which has lasted more than 150 days thus far, may be far from over.

With November’s Congressional elections drawing ever closer, US President Donald Trump faces a new round of major decisions on Iran with three main strategic options. 

The first is escalation, which he has threatened multiple times, including in joint action with Saudi Arabia in Iraq against Iranian-backed forces on Jul 28. 

The second is the status quo of periodic flare-ups, like the ones of recent weeks. 

The third is a major climbdown – what many critics will call capitulation – probably wrapped up in the political rhetoric of “victory”.

While the last option can never be ruled out given Trump’s mercurial nature, an increasing number of key US allies fear that the first or second scenario will play out in the second half of 2026. 

Given the uncertainty, scenario planning can continue to help think through plausible outcomes and the implications. The goal is building preparedness and resilience for what might be even more unpredictable times ahead.

US allies unlikely to step up

The global economy has proven resilient so far. But any scenario other than peace would see oil and potentially wider energy prices continuing to spike on at least a periodic basis, which would be very damaging for Asia, given its reliance on oil from the Middle East.

Whichever path Trump takes, he may have no good options now, as shown in his and Secretary of War Pete Hegseth’s increasing frustration over the conflict.

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For example, Hegseth appeared before the US Senate on Jul 21, when he made a request for an additional US$87.6 billion for the defence budget, almost US$70 billion of which appeared to be headed to the Iran operation.

Five months into the crisis, one of the ways the Trump team appears to want to pressure Iran is through international – especially European – help. 

At the Nato summit in early July, when conflict was escalating, Trump said he was “not happy” with the organisation because it declined to get involved in the war. This was despite him saying at the summit’s press conference that the US “didn’t need the help”.

Yet, as much as creating a wider international diplomatic coalition could still help unlock the crisis, it is unlikely to take shape and be a game changer any time soon while US-Iran tensions remain high.

A planned meeting in London between Hegseth and his UK counterpart Wes Streeting this week was reportedly postponed, and potentially cancelled outright.

Many US allies see launching such an initiative as too challenging because the risk of the conflict escalating again remains high. Many also are still smarting from the insults of Trump and Hegseth in recent months.

In this increasingly unstable quagmire, the bad news is that the crisis could easily continue for weeks, perhaps even another 150 days, barring a major climbdown from Trump. 

So whereas many economic forecasters had looked for the Strait of Hormuz to fully reopen again by this autumn, this prediction now looks increasingly optimistic.

Globally, this expectation is also feeding through into prediction markets such as Polymarket, with growing sentiment that any lasting breakthrough to the crisis may not come this year.  

Iran more resilient than expected

The mood from Iran certainly doesn’t seem positive, with the regime’s Islamic Revolutionary Guard Corps announcing in July that the US president “should know that, by God’s grace, even if this war lasts for several years, until the very last day, our missiles and drones will rain down on American criminals”.

This underlines how the anointment of Mojtaba Hosseini Khamenei, Ayatollah Ali Khamenei’s son, as the nation’s new supreme leader is a signal that regime hardliners in Teheran are probably still firmly in charge.

For now at least, reformists look likely to be frozen out.

As well as the length of time of the war, a key variable is whether any future significant military action will largely continue to be concentrated in Iran or extend much more broadly. 

To be sure, Iran from the start of hostilities has been hitting the Gulf states and blocking Hormuz, to maximise international pressure on Israel and the US. However, to date, the war has been mostly contained – but that does not alleviate the tragic loss of life across the region.

In March, weeks after the US and Israel launched their first strikes in Iran, it seemed that the most likely scenario would be centred around a “regime in ruins”.

This involved a war focusing on Iran and ending in weeks, with the remnants of the regime in Teheran remaining in place, albeit in a much weakened form from before.

While some of this scenario has happened, one of the surprises to some US decision-makers is how resilient the regime is proving – in the short term, at least. 

This does not mean its power will not decay in the future. Its grip on power could grow more precarious with limited military capabilities and without widespread domestic public legitimacy – with the possibility of gradually collapsing from the inside.

For the foreseeable future, however, the regime’s embeddedness in Iran means it is unlikely to crumble. Moreover, despite the clear military superiority of the US, Teheran appears to maintain the ability to conduct an asymmetrical war, such as by leveraging Hormuz.

So far, US and Israeli airpower alone has been insufficient to realise Trump’s vision of unseating the clerics in Teheran from power.

It is perhaps only a major US escalation, including “boots on the ground” – with the risks that would come with this – that could change this picture fundamentally.

The uncertainty from Iran is likely to remain a headache for the global economy, especially for highly oil-dependent Asia, and could yet contain downside surprises for investors.

Barring a major Trump climbdown, the crisis – both in Iran and world markets – could continue for months more. 

The writer is an associate at LSE IDEAS at the London School of Economics

[SINGAPORE] When I was growing up in Singapore in the 1970s and 1980s, visiting a Metro department store was a treat. Its array of goods available was mind-boggling.

Often, mainboard-listed Metro : M01 +1.09% was the go-to place for clothes for Chinese New Year, toys for Christmas and gifts for special occasions.

When the extended family gathered for Christmas, the exchange of presents invariably involved numerous items that were bought at a Metro outlet.

I still like visiting physical retail stores in Singapore. However, my days of patronising a Metro store are long over.

In recent years, many other retail outlets offer superior shopping experiences and value propositions to department stores.

Perhaps, for old times’ sake, I should visit a Metro store soon while I still have the opportunity to do so.

Recently, Metro said it would shutter its last two remaining department stores here at Paragon and Causeway Point when the current leases expire.

From an emotional viewpoint, it is sad to see department stores, which used to be the king of retail formats here, gradually disappear. Also, it is sad for loyal, long-serving staff of such stores to see said stores shutter.

Nonetheless, putting sentiment aside, as a shareholder, I applaud Metro’s possibly long-overdue decision to exit large-format department stores.

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The listed group’s retail operations have been bleeding.

The retail division reported a loss after tax of S$11.4 million in the financial year ended Mar 31, 2026, or FY2026, compared with a loss after tax of S$6.9 million in FY2025.

This was mainly due to lower revenue, lower gross margins and higher impairment loss amid the challenges confronting Singapore’s retail sector.

Metro plans transition to more flexible retail approach

However, while Metro is getting out of running department stores, it is not looking to exit the retail business – a potentially wrong move in my view.

Metro’s board of directors said the group will transition to a more flexible retail approach and is evaluating various retail formats, including smaller-format stores, multi-speciality concept stores, curated retail experiences and pop-up store initiatives.

Accordingly, the group’s management has commenced evaluating locations and opportunities for the roll-out of the new retail multi-concept stores. Among its various considerations is financial viability.

Should Metro be investing time and resources in trying to do things differently in retail? 

Generating a decent profit from running physical retail stores selling third-party goods can be tough.

Major brands are investing in mega stores to boost their engagement with customers. Some Chinese and international retail stores are proving competitive here with their strong procurement networks.

Fortunes tied to property business

As it stands, Metro’s fortunes are already largely tied to how its property development and investment business performs.

Recently, the property division has been awash in a sea of red due to China’s prolonged property sector headwinds.

For FY2026, Metro suffered a net loss attributable to shareholders of S$203.2 million. This was mainly due to non-cash fair value and impairment losses arising from its China real-estate exposure.

Shareholders’ funds shrank from S$1.58 billion in FY2022 to S$925 million in FY2026.

Nevertheless, Metro can bank on its property business to turn around its fortunes, albeit the group should look to double down on developing private homes in Singapore.

In May, a 70:30 joint venture (JV) between wholly owned subsidiaries of Wing Tai : W05 +0.64%and Metro was awarded a 99-year leasehold site at Dunearn Road by the Urban Redevelopment Authority at the tender price of about S$533 million.  

The JV company plans to build a residential development comprising about 330 homes with commercial uses at the ground floor.

At its launch weekend in July, 56 per cent of the 380 homes at the neighbouring Dunearn House were snapped up at an average price of S$3,140 per square foot. 

Why focus on condo development

Going forward, Metro should focus on building new condo projects in Singapore. It can look to beef up capabilities in condo development and take a majority stake in such projects when working with partners.

While housing developers face tough rules, building new private homes in the Republic can be a good business to be in.

The supply of housing land is typically well-controlled, while private housing demand is generally resilient.

Growth in income and household formation, coupled with liquidity, as well as enduring aspirations for condo living support private housing demand.

Financial returns from condo development can be decent, considering the risks involved.

A housing project which experiences robust sales when units are launched for sale off-plan may deliver a double-digit internal rate of return.

Crucially, the private housing development market here is fragmented, and one where a larger player may not enjoy much advantage over smaller rivals.

Much of the work in the building and selling of homes is generally outsourced to third parties. Meanwhile, the attributes and quality of individual projects are often what matters to increasingly discerning home buyers.

Metro was founded in 1957 by the late Ong Tjoe Kim, who started out with a textile store along High Street. The group was listed on the domestic bourse in 1973, with retail being its dominant business in the early days.

There are multi-pronged efforts underway to boost investor interest in Singapore stocks. More investors will flock to local-listed entities if those entities fare better financially.

Doubtless, Metro has a rich retail history. However, businesses need to transform, as market conditions and consumer needs change. 

Metro can do well for its shareholders and play its part in boosting investor interest in the local bourse, by ditching the retail business and banking on building homes here to deliver consistent profits.  

THERE comes a stage in life when silence no longer feels empty. It feels necessary. That has been one of the quiet surprises of my first month of retirement.

Silence is not loneliness. Not withdrawal. Not weariness with the world. But solitude – the deliberate choice to spend time with oneself in order to think more clearly and live more deliberately.

For decades, my days were defined by meetings, deadlines, decisions and an endless stream of messages demanding attention. Like many professionals, I had become accustomed to measuring a productive day by the number of conversations held, problems solved and items crossed off a list.

Retirement has disrupted that rhythm. In its place has emerged something I had almost forgotten: the luxury of uninterrupted thought.

In an age of endless notifications and performative busyness, solitude has become strangely misunderstood. To be alone is often seen as a social deficiency or emotional absence.

Yet psychologists have long distinguished solitude from loneliness. Loneliness is unwanted isolation. Solitude is chosen aloneness – and increasingly recognised as restorative rather than harmful.

The distinction matters.

Constant motion as social currency

Modern life rewards constant motion. Calendars overflow. Messages arrive before thoughts are completed.

Busyness has become a form of social currency, signalling relevance, commitment and importance. We have become remarkably good at responding quickly, multitasking efficiently and remaining constantly available.

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But somewhere amid all that activity, we risk losing something far more valuable: the ability to hear ourselves think.

It is a paradox of contemporary life. Never have we been more connected, yet uninterrupted thinking has never been harder to find.

Even moments that once invited reflection – waiting in a queue, commuting on a train or sitting quietly over coffee – are now quickly filled by another glance at a screen.

Silence has become something to eliminate rather than embrace.

Yet there is a quiet maturity that comes when one no longer fears one’s own company. In our younger years, movement often feels necessary. Activity creates momentum. Momentum creates the reassuring sense that we are making progress and that our time has value.

Age and experience often teach a different lesson.

The ability to sit quietly with one’s thoughts is not emptiness. It is freedom – from performance and from the constant need to justify one’s worth through visible activity.

It is the freedom simply to be.

Research published in Scientific Reports found that periods of voluntary solitude were associated with lower stress levels, greater emotional regulation and a stronger sense of autonomy.

It is the state of living according to one’s own values rather than external expectations.

Perhaps this explains why so many people instinctively seek moments of quiet and solitude after years spent navigating demanding careers, raising families and carrying the weight of countless responsibilities.

What initially feels like an absence of activity gradually reveals itself to be the presence of something else: clarity.

Unexpected dividends

Thinking is different from processing information. Take the case of reading. It is not merely consuming facts or opinions. A good book becomes a conversation between the author and the reader’s inner life.

Reflection works in much the same way. Experiences rarely reveal their full meaning while we are living through them. Their significance often emerges only years later, when time has softened emotion and sharpened perspective.

Like a well-aged wine or a carefully matured cheese, understanding often deepens with patience.

Over time, we realise that the difficult colleague taught us resilience. The failed project cultivated humility. The unexpected setback redirected a career. The season of sacrifice quietly reshaped priorities.

Without reflection, experiences remain mere isolated events. With reflection, they become wisdom.

This is perhaps why some of life’s clearest insights arrive unexpectedly: during an early morning walk before the city awakens, over a cup of coffee or simply in the unhurried quietude that follows a lifetime of rushing.

Not every answer emerges from discussion. Some truths require silence and solitude before they can be heard.

Organisations need silence too

There is also a wider lesson here for organisations and societies.

Businesses rightly prize collaboration, responsiveness and speed. But innovation rarely comes from perpetual meetings alone.

Sound judgment is seldom the product of reacting to every incoming message. The most thoughtful leaders know when to step away from the noise to think before deciding.

A culture that values only visible activity risks confusing motion with progress.

Singapore, too, has built its success on discipline, efficiency and relentless execution. These remain enduring strengths.

But as the nation navigates an increasingly uncertain world shaped by artificial intelligence and geopolitical tensions, the premium on thoughtful judgment will only increase. Mastering it will yield handsome dividends.

In such an environment, reflection is not a luxury. It is a strategic capability.

Perhaps retirement has simply made this truth easier for me to see. 

The values of solitude and silence are not confined to those leaving the workforce. It is something worth protecting at every stage of life, whether one is beginning a career, leading an organisation or entering a new season.

A quieter life is not necessarily a smaller one. Often, it is simply a more intentional one.

And in a world that grows noisier by the day, the ability to seek solitude may become one of the most important disciplines we can cultivate – not to escape the world, but to engage it with greater wisdom, balance and purpose.

The writer is a lawyer who recently retired after having practised in international firms and multinational corporations. He is a senior accredited director of the Singapore Institute of Directors and serves on several boards, including as chairman of SGListcos.

Sustainable investing

GIC evolves sustainable strategy for new pressures

GIC is adapting its sustainability strategy alongside a broader adjustment to its investment approach as the Singapore sovereign wealth fund grapples with a more divided and uncertain world.

Closer integration of its sustainability and investment teams, a fragmented opportunity set in energy transition and stepped up management of physical climate risks are among the changes revealed by GIC in its latest annual and sustainability report.

GIC says that it is changing its investment framework in 2026 after more than a decade in response to what chief executive Lim Chow Kiat describes as a “more complex and dynamic world”.

“At GIC, we have long felt that the gravest risks are those that accumulate quietly before surfacing abruptly,” he writes in the report. “Today, across the global economy, constraints are tightening while outcomes are widening, creating a world of greater scarcity and complexity. These constraints do not exist in isolation. Geopolitical fragmentation, limited fiscal flexibility, and bottlenecks in technology and energy reinforce one another as their impacts play out unevenly across markets.”

The new investment framework introduces two key changes that strengthen the primacy of GIC’s mandate and give the firm more flexibility in how it executes that mandate.

The first is in the “Strategic Portfolio”, which reflects the Singapore government’s risk appetite and long-term return expectations. It’s the primary vehicle that ensures GIC can fulfil its fundamental mandate of preserving and enhancing the international purchasing power of the national reserves that it invests. Under the new framework, the Strategic Portfolio shifts away from a traditional asset class-centric organisation to allocations based on return characteristics – a bias towards function over form. For example, the growth-focused “equities” asset grouping can freely deploy between public and private equities without having to stay within allocation ranges for each of those asset classes.

The second key change is in the “GIC Portfolio”, which is where GIC aims to add value to the Strategic Portfolio through active strategies within risk limits. The new framework emphasises the portfolio’s objective to outperform the Strategic Portfolio.

Taken together, the changes are aimed at allowing GIC to respond more nimbly to what the firm perceives to be deep uncertainties and structural changes in the investment landscape where the old rules do not always apply.

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Climate change happens to be one of the forces that GIC views as reshaping future growth and risk patterns, so its approach to sustainable investing is also evolving to further integrate sustainability within its investment functions. While GIC had focused sustainability teams within investment departments in its previous iteration, the firm says that the sustainability and investment teams will now work more closely together to better capture opportunities from climate change and sustainability trends.

Internalising sustainability in its investment functions could allow GIC to better address the sustainability risks and opportunities that lie ahead.

GIC outlines three important shifts in the sustainability investment landscape. The first is in sustainability sentiment and policies. Climate targets are less ambitious but more balanced against economic and social needs. Policies are more fragmented as governments adjust their climate pathways to local realities.

The second shift is that the energy transition is increasingly driven by energy security and resilience concerns, as opposed to purely environmental or economic reasons. GIC expects this to accelerate interest in cleaner and more reliable energy systems, because “where climate ambitions have faced headwinds, focus on energy security and resilience have gained traction”.

Finally, the massive growth of the artificial intelligence sector is also fuelling the energy transition. GIC says “expanding renewable capacity remains the quickest way to add electricity supply, while modernising power grids is essential to integrate low-carbon sources and maintain reliability”.

In previous years, GIC had identified three climate-related “opportunity sets” – decarbonisation solutions, energy transition and adaptation and resilience. Those remain investment priorities, but the latest report contains an important tweak to elevate the importance of local circumstances.

“The previous regime of broadly converging policy tailwinds is now giving way to a more fragmented landscape,” GIC states. “Sustainability-related strategies now require closer alignment with local policy conditions and market fundamentals.”

In essence, GIC sees opportunities, but they are uneven.

Climate fragmentation also means that the physical risks of climate change will probably increase. GIC has therefore made managing physical risks for its investments a strategic priority. Critically, GIC is clear that these physical risks are not distant dangers.

“The global transition towards a net-zero economy will not happen fast enough to avoid significant physical changes in the climate and environment,” the firm states. “This creates real, near-term physical risks for the companies and assets we invest in. We seek to understand and underwrite these appropriately.”

Highlighting the threat of damages and higher insurance costs, says that for assets with high physical risk exposure, the firm will assess risk management actions and possible divestment opportunities. The firm also takes strategic positions in proven adaptation and resilience solution providers with attractive valuations, and will support companies in implementing adaptation strategies where appropriate.

GIC, which does not report portfolio emissions, is also looking at how it can better measure the decarbonisation progress of its portfolio. It says it is working on creating its own metrics, including ways to reflect the emissions intensity of its portfolio complemented by a transition metric, exposure to growth potential from the climate transition, and exposure to climate risks.

Those metrics, when ready, would be welcome. Through its annual reports and occasional papers, GIC has a commendable history of sharing valuable insights into how it views and addresses sustainability issues as a long-term investor. However, the firm has yet to disclose metrics that can be used to understand its portfolio’s progress on its sustainability impact and exposure to sustainability-related risks, especially when it comes to climate impact, risks and opportunities. Without those metrics, it is difficult to understand how well GIC is translating its strategy into practice.

Sustainable finance

The discomfort in data centre green loans

One of the less intuitive aspects of green finance is that environmental benefit is relative. A project could be eligible for green funding even if it has a high carbon footprint – if the footprint is substantially smaller than a less efficient alternative.

Green funding for data centres regularly sparks debate about what should be considered green.

AirTrunk is the latest to obtain green financing, with a US$2.3 billion green loan for a Johor hyperscale development. The deal earned its green label because of its energy and water efficiency. The centre has a targeted design power usage effectiveness (PUE) of 1.37, which means that for every unit of energy used for computing an additional 0.37 is spent on the facility for purposes like cooling. The global average PUE for data centres is about 1.5 to 1.6.

The centre will also use “advanced water-efficient cooling technology”, although AirTrunk has not announced the level of water efficiency it will achieve.

A lot of criticism about green financing for data centres stems from the fact that these data centres can produce large amounts of greenhouse emissions even if they are efficient. How can a loan finance the generation of so much emissions and still be considered green?

The short answer is: Because it is significantly more efficient.

The long answer adds: Also, the benefits of the development are deemed to be worth the absolute emissions, and while achieving net-zero emissions through mechanisms such as renewable energy certificates is possible in some cases, it is not feasible in many cases.

Nevertheless, there are valid criticisms about the eligibility thresholds for data centres, relating to whether these thresholds are stringent enough and comprehensive enough.

One problem is that eligibility thresholds vary depending on jurisdiction. For example, the PUE threshold for a data centre in Singapore is 1.35, which means that AirTrunk’s project would not be eligible for green financing if it was built in Singapore. While these differences reasonably reflect local circumstances, they raise concerns about data centre development seeking jurisdictions of least resistance.

Another concern is that eligibility criteria might not be comprehensive enough. For instance, eligibility criteria are usually narrowly defined and do not generally consider the carbon intensity of the power supply, water usage and community impact in totality.

Perhaps a more fundamental problem with data centres lies with the fact that usage itself is highly inefficient. Even with a PUE of 1.5, most of a data centre’s energy consumption is for the computing carried out in the IT equipment. Data centres are multiplying so rapidly and using so much electricity because there is so much data storage and computing taking place, and most of that activity is probably useless. Do we really need that much data? Does every tech company need to build its own large language model? Do we need to say “please” and “thank you” with ChatGPT?

There are perfectly legitimate use cases for data centres, and taking away green financing might prevent those use cases from benefitting from the technology on a more sustainable footing. Reducing wasteful usage might be a more impactful way to lower data centres’ carbon footprint.

Other ESG reads

• Sembcorp to purchase 20% stake in clean power unit of Singapore refiner Aster
• OCBC, Asset World Corp ink pact with US$200 million sustainability-linked loan
• Brookfield bets on AI inference, clean power in India while tackling curtailment risks
• Acra proposes sustainability disclosure standards for Singapore
• Next step in sustainability reporting: Make these disclosures useful

[SINGAPORE] Thirty listed companies comprise The Straits Times Index (STI). But when those companies choose an auditor, the field narrows to just four names.

Every current constituent appoints either PwC, KPMG, EY or Deloitte. Not one uses a mid-sized firm, generally referring to businesses with fewer than 1,000 employees.

This is despite the fact that mid-sized firms, such as Baker Tilly, BDO and RSM Singapore, do audit other listed companies and compete for initial public offering (IPO) work.

In FY2025, KPMG held the most STI mandates at 13, followed by PwC with 11. Deloitte audits four constituents, while EY audits two.

By value, however, PwC led by a wide margin. Its STI clients disclosed S$81.1 million in audit fees attributable to PwC and its network firms, equivalent to 53.7 per cent of the FY2025 fee pool.

This distribution is also skewed by big clients. In FY2025, the five largest single audit bills made up almost half of the S$151.1 million total.

Jardine Matheson disclosed S$27.4 million, followed by OCBC at S$16 million, Wilmar International at S$12 million, DBS at S$11 million and UOB at S$8 million.

What allows the Big Four to have such an iron hold on the STI, and is there any chance for this to be broken?

Chester Leong, corporate adviser at Apexia Corporate Advisory, believes it will be “many years” before the latter is possible.

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“Right now, if you suddenly switch from a Big Four (auditor) to a mid-tier firm, shareholders will not be happy,” he says. “The perception is that the audit quality may go down.”

Fee advantage?

One possible advantage that mid-tier firms might be assumed to have is that of price.

While fee structures differ by engagement, industry players estimate that a mid-tier firm may charge 30 to 50 per cent less than a Big Four firm for a comparable listed-company audit, on a like-for-like basis.

The discount reflects differences in overheads, brand premium and operating models, rather than materially different audit standards, says Leong.

The Business Times looked at annual report disclosures of all STI constituents over the last five financial years. Across these 150 company-year observations, there were just six changes of auditor.

Five of these changes do coincide with a lower fee in the new auditor’s first year, with a median reduction of 8.4 per cent.

However, industry players caution against concluding that companies switch simply to save money.

Leong says tenders for new auditors are often prompted by broader concerns such as service quality, staffing constraints or delays. Once a tender is actually held, however, price becomes one way for a challenger to dislodge the incumbent.

Mak Yuen Teen, professor (practice) of accounting and director of the Centre for Investor Protection at NUS Business School, says a firm may quote a lower initial fee to secure an attractive client, before raising it gradually in subsequent years.

“There is some risk of aggressive pricing or ‘lowballing’, although hopefully for such large companies, audit committees would not recommend audit firms mostly on the basis of price,” he says.

Offering a lower fee does not always amount to lowballing, notes Terence Lam, director of professional standards and advocacy at the Institute of Singapore Chartered Accountants (Isca).

Rather, audit firms may have different staffing structures, technology or delivery models, or have identified genuine efficiencies.

The price must nevertheless support the work required, particularly in the first year, when the incoming auditor faces a heavier transition burden, he says.

“Any lower fee must still support sufficient audit hours, experienced personnel, partner oversight and specialist resources.”

Not worth the savings

Industry players say that even where a mid-tier firm may be capable of doing the work, the potential savings are often too small to offset the perceived risk of moving away from a familiar name.

The STI constituents’ combined FY2025 audit bill of S$151.1 million was less than 0.05 per cent of their combined revenue or total income, which exceeded S$300 billion.

For a large company, a lower audit fee may therefore be of little significance compared with the reputational consequences if the auditor appointment is later questioned, says Bernard Lee, founder and senior partner of Audit Alliance.

He likens the choice to the old corporate maxim about buying IBM computers: the dominant provider may cost more, but the person making the decision is less likely to be blamed if something goes wrong.

Robson Lee, a partner at Kennedys Law, says appointing a new auditor merely because its fee is lower than the incumbent’s “would be a fallacious decision”.

But he sees no inherent governance risk in using a mid-tier firm, “so long as the audit work is able to withstand professional scrutiny and satisfy the accounting regulator’s requirements”.

The risk of being questioned about the choice of auditor may come down to perceptions.

“The low turnover of auditors is probably more attributable to the fact that large companies prefer the ‘safety’ of a Big Four audit firm,” says Stefanie Yuen Thio, joint managing partner at TSMP Law.

“They have international networks which make audit and consolidation of foreign subsidiaries more convenient, and a chief financial officer is less likely to be questioned for picking a brand name audit firm.”

If anything, audit fees have been rising, although this has broadly followed growth.

The constituents’ combined audit bill in FY2025 was 20.7 per cent higher than in FY2021, broadly matching the 20.4 per cent growth in combined revenue or total income in the same period.

The median rise in audit fees was 22.3 per cent over the entire period. But the sharpest yearly increases came earlier, peaking at 12 per cent in FY2022.

Lam says the increase in 2022 may reflect some catch-up after Covid-19, while Leong reckons acute staffing shortages during the pandemic drove unusually steep fee increases for some clients.

More recently, the Big Four have shifted parts of their audit work to regional centres in markets such as Malaysia and the Philippines to contain costs. This may help explain the moderation in audit fee increases in the past two years, Leong says.

When continuity becomes familiarity

While the Big Four’s dominance in STI audits may not have pushed up fees, this concentration has implications beyond competition, industry players say.

One of these is a corporate governance debate over audit firms having long tenures.

Granted, there are clear operational reasons for sticking with one auditor. A new auditor has to learn the company’s operations, systems, subsidiaries and accounting policies; in turn, management must devote time to onboarding the firm.

Continuity matters because bringing in a new firm is “disruptive and time consuming”, says Yuen Thio, who has served on audit committees responsible for appointing listed companies’ auditors.

Industry players differ, however, on whether a long relationship may weaken an auditor’s independence or professional scepticism.

Prof Mak sees this as a real risk, which may not be adequately addressed by simply rotating the lead partner while retaining the firm.

“(The) long tenure of audit firms is a concern to me,” he says. “I do not see mandatory rotation of audit partners as a solution to loss of independence or professional scepticism – it is unlikely a new partner will disagree with the previous partner from the same firm.”

He believes the Singapore Exchange should require companies to disclose when their current auditor was first appointed and how long it has served.

The professor also supports making it mandatory for companies to re-tender for an auditor after a prescribed period – and, eventually, putting a cap on audit firm tenure.

“I went to an annual general meeting recently and I think the audit firm has been the auditor for that company since the audit and risk committee chair and I were in diapers – it was probably that long,” he quips. “That cannot be healthy.”

Others argue that continuity can improve audits, as the firm will have a deeper understanding of the company and its risks.

Continuity can deepen an auditor’s knowledge of a company’s business, systems and risks, says Lam: “Familiarity should sharpen the audit, not soften the challenge.”

Partner rotation, independent reviews and restrictions on non-audit services remain important safeguards, although their effectiveness depends on how rigorously they are applied, he adds.

Leong has not seen evidence that long firm tenure alone damages audit quality.

Staff turnover within audit firms means that few members of an engagement team remain with a client for an extended period. Lead partners also rotate, and other partners typically review the work, he notes.

Meanwhile, the firm retains institutional knowledge, including audit methodologies, prior-year working papers and experience accumulated over successive audits.

The Big Four edge

Industry players stress that mid-tier firms are very much capable of listed-company work.

Many already audit listed businesses. Such firms are also involved in three of the seven Singapore Exchange IPOs so far in 2026, Lam points out.

“Greater choice – that is, a broader pool of firms that are able to compete effectively – would strengthen the resilience of the audit market, but choice must be built on capability, not compromise,” he adds.

But STI constituents are not ordinary listed companies. They tend to be large regional groups – and auditing these is a complex task, say industry players.

The auditor’s core team may need support from specialists in valuation, information technology or fraud management.

Says Isca’s Lam: “The Big Four benefit from having extensive international networks, established technology platforms and deep benches of sector and technical specialists.”

The Big Four can spread the cost of such capabilities across thousands of employees and international member firms, while drawing on shared audit platforms, centralised training and in-house software.

For mid-sized partnerships, the economics are far more difficult, says Audit Alliance’s Lee. They must hire scarce specialists, invest in technology and training, and absorb the regulatory, insurance and reputational risks of auditing a large public company.

Expansion is often funded from a partnership’s accumulated earnings, and a mid-sized firm may not have enough to build all these capabilities at once, he adds.

International reach creates another hurdle. Many STI constituents operate across several markets, which means the parent company’s auditor must coordinate overseas component auditors, review their work and apply a consistent methodology across the group.

“A larger company like CapitaLand or Singtel has a major regional footprint,” Lee says. “Your (Big Four) network will have an advantage.”

The capability gap is compounded by a shortage of talent, says Apexia’s Leong.

Many partners with experience auditing listed companies remain concentrated in the Big Four, whose pay, training infrastructure and career prospects are hard for smaller firms to match.

Together, these constraints create a chicken-and-egg problem: mid-tier firms need major mandates to build scale, experience and credibility, but struggle to win those.

However, Prof Mak argues that while some STI constituents genuinely require the Big Four’s specialist depth and international reach, others may well be able to appoint the fifth or sixth largest audit firms.

At times, the weight placed on a Big Four brand might exceed the company’s actual requirements, he notes.

Lam agrees that the Big Four benefit from being established brands: “Brand familiarity among boards, investors and lenders may also reinforce their position.”

To break into the benchmark index, mid-tier firms do not just have to match the Big Four’s talent, technology and international reach. They must also persuade boards that a fifth name presents a credible alternative, rather than an added risk.

THE data centre infrastructure boom fuelled the stock market’s artificial intelligence euphoria: is it also now about to destroy it?

Unease about huge – and growing – capital spending has turned into a serious overhang for some of the biggest tech shares.

That was clear last week, when the stock market chose to focus on how Alphabet had burnt through cash for the first time in its history as a public company, rather than the surprising leap in cloud revenue and profitability that the spending had made possible.

This week, Meta has been put through the wringer for vowing to press on with its massive investments.

At the same time, it dashed hopes that it would relieve the financial pressure by reselling some of its surplus data centre capacity, as Elon Musk’s SpaceX has already done.

Microsoft bucked the trend with the news that it is finally seeing serious revenue acceleration from its AI spending. Its shares, though, are still down about 15 per cent from last year’s peak.

The unease over data centre spending comes at the end of a month that has also brought a sharp drop in semiconductor shares.

The question now is whether this is just a temporary summer tantrum or a serious change of heart about the AI trade that has underpinned the stock market.

Cyclicality, capex and profitability

One possibility is that Wall Street believes the peak in capex is close, even if spending still looks robust in the short term.

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Neither the numbers nor the rhetoric coming out of the tech companies give any reason to think this. Rather, the mood was summed up by the studied understatement of Microsoft chief financial officer Amy Hood, who described the present shortage of capacity as a “relatively extreme moment”.

Some cyclicality in spending is inevitable, even in the midst of a secular boom. The memory chip shortage will run until at least the end of 2027, to judge from recent reports from Micron and others, but new capacity due in 2028 could change the picture. It seems early to anticipate a turn, though.

Another possibility is investors are worried that while the revenue the tech companies have been able to generate from all their new AI capacity is starting to rise fast, it is still modest given the scale of spending.

The order books of the big cloud companies provide some encouragement. Microsoft and Google’s combined backlog jumped to S$1.2 trillion at the end of last month, compared with less than S$500 billion a year ago.

But there is a clear concentration of risk here, with a massive dependence on OpenAI and Anthropic, which have yet to prove they will need all that capacity to service their own customers.

In a rapidly evolving market, it is also hard to tell when the AI companies will reach anything like sustained profitability.

Anthropic provided a shot to the market with a growth surge earlier this year that led it to predict its first profitable quarter.

But that was followed soon after by reports of companies cracking down on excessive use of AI services by their workers, known as tokenmaxxing.

More recently, inroads made by Chinese models have raised the spectre of greater pressure on pricing.

A third explanation for the unease may be the sheer scale the capital spending has reached relative to the industry’s overall finances.

Meta’s generation of positive free cash flow tumbled in its latest quarter, while Microsoft said it would stay positive for its next fiscal year, which has just started.

But this is scant comfort coming from companies which churned out more than US$110 billion spare cash between them in their last fiscal years.

This points to a deeper structural shift in the industry’s finances. Alphabet, besides burning cash, has lifted its long-term debt to nearly US$100 billion, up from US$11 billion a year ago, while surprising the market recently by raising US$85 billion in fresh equity.

Credit rating agency Moody’s summed it up in a report last week: As the big tech companies turn into “asset-heavy” businesses, their “relationship with capital, risk and credit (are) being redefined.”

Until now, it has been possible to view Alphabet as a hugely profitable search engine company that chose to invest its spare cash in AI. It is quickly turning into an AI company with a very different financial structure – and, possibly, business model – to what came before.

None of these explanations, on their own, provide a particularly persuasive case for why this would be the moment for investors to get cold feet about the data centre boom. Taken together, though, they explain why the anxiety level is rising. FINANCIAL TIMES