Never mind the ozone layer, mind your dividends: Opinion

Source: Business Times
Article Date: 16 Apr 2026
Author: Jude Chan

If a company emits a lot of smoke to make its products, its costs are about to shoot up.

Try sleeping in Singapore without the air-conditioning switched on these days. It is an exercise in sweaty, tossing-and-turning misery. The mercury is steadily rising, the nights are stifling and the relentless hum of the compressor has become the island’s unofficial lullaby.

But what we often fail to realise is that we are paying for this heat twice.

The first hit arrives at the end of the month in the form of a bloated electricity bill. The second hit, however, is a massive, invisible invoice that is quietly making its way into your investment portfolio.

For years, “carbon” was a word confined to earnest activists and glossy corporate sustainability reports that nobody actually bothered to read. An everyday mom-and-pop investor might easily dismiss carbon markets as high finance nonsense.

But the rules of money in South-east Asia are changing – the grace period for dirty business is over, and the financial hit is very real.

You do not need to care about the ozone layer, but you absolutely must care about your dividends.

The taxman cometh

Cutting through the jargon, “decarbonisation” simply means governments are finally going to charge companies for making a mess.

Across the Causeway, Malaysia is rolling out a new carbon tax this year – pointing it directly at the heavy hitters first: iron, steel and energy producers.

This push mirrors the playbook we have already witnessed in Singapore. The Republic fired the region’s first starting pistol when it introduced a carbon tax back in 2019.

While it began as a mere gentle tap on the wrist to give industries time to adjust, the training wheels have since come off. The local tax rate was sharply increased in 2024 and 2025.

Malaysia is now walking that same path, serving as a reminder that what begins as a mild compliance check inevitably morphs into a heavy, permanent cost of doing business.

If a company emits a lot of smoke to make its products, its costs are about to shoot up. When costs go up, profits go down – and your reliable annual dividend gets slashed. It is that simple.

Then there is the European Union’s Carbon Border Adjustment Mechanism, or CBAM, which is essentially a massive toll booth being erected around Europe.

Historically, if a European steelmaker had to pay high carbon taxes, they would just get undercut by a cheaper, dirtier steelmaker from Asia.

Europe is putting a stop to that. If a company in South-east Asia wants to sell iron, steel, aluminium, cement or fertiliser to Europe, they now have to prove exactly how much carbon they emitted to make it. If the product is dirty, they get slapped with a hefty border fee.

For investors, the implication is brutal. If an Asian exporter refuses to modernise and clean up its factories, it will simply be priced out of one of the world’s most lucrative markets.

But what happens if a factory simply cannot stop polluting right away? That is where “carbon credits” come in.

Think of a carbon credit as a tradable permission slip. If a project developer in Indonesia protects a vast peatland or builds a huge solar farm, they stop a certain amount of carbon from entering the sky. That effort gets audited and turned into a digital certificate: one carbon credit.

A company looking to sidestep a new tax or a European trade toll could buy that credit. They use it to mathematically cancel out the smoke from their own chimneys. It is an accounting trick, yes, but it is one designed to attach a real, painful price tag to pollution.

If buying these credits eats into their profit margins, companies will eventually choose to clean up their act instead.

Cleaning house

While Singapore has virtually no natural resources to generate its own carbon credits, it is doing what it does best: becoming the middleman.

The Singapore Exchange (SGX Group) is a prime example. Starting this year, the biggest listed companies have to track and report the emissions of their entire supply chain.

It is a massive headache for companies, but mandatory carbon tracking is simply the strict new global reality.

SGX clearly saw the wave coming. Alongside financial institutions such as DBS and Standard Chartered, as well as Temasek’s green investment company GenZero, the bourse operator cleverly co-founded Climate Impact X, which is now the region’s flagship carbon exchange.

So, as listed firms inevitably scramble to buy and trade carbon credits to meet these new climate standards, SGX and its fellow backers are sitting pretty. They have built the plumbing for a multi-billion dollar flow of invisible goods, perfectly positioned to reap the rewards of a very smart early investment.

Right beside them are the financial heavyweights. A recent RHB report rightly points out the massive capital required for this regional transition.

To clean up their act, traditional companies need enormous loans to buy cleaner technology or revamp their factories.

This perfectly positions the big three – DBS, OCBC and UOB – to bankroll the shift. They are not planting the trees; they are financing the transition and collecting the interest.

Other local players are also finding very clever ways to cash in.

Sembcorp, for example, is no longer just selling power. They built a smart digital platform called GoNetZero, which helps massive global firms track their carbon mess and easily buy the carbon credits they need to fix it. It turns a massive corporate headache into a smooth software service, and Sembcorp collects the fees.

Keppel is playing an equally smart game with something called “transition credits”. This basically means they are looking to buy old, dirty coal power plants in the region just to shut them down early and replace them with clean energy. By turning off the smoke years ahead of schedule, they earn highly valuable credits – they are literally getting paid to close down the bad stuff.

The takeaway for the retail investor is clear.

Carbon is now just another raw material, and it comes with a steep price tag. And when you look at your stock portfolio today, you need to ask a very basic question: Is this company going to pay the fine, or are they going to pocket the fees?