Mounting climate and physical risks threaten economic foundation, says Singapore minister

Key takeaways

• Physical climate risks – including extreme weather events, supply chain shocks, and damage to critical infrastructure along its low-lying coast – are increasingly material threats to Singapore’s economic foundation, says government minister Indranee Rajah.
• Although Singapore has unveiled its inaugural national adaptation plan, experts caution that focusing on “adaptation” provides a false sense of security. They warn that the world has already crossed critical temperature thresholds, accelerating the risk of climate and ecological tipping points.
• Under high-emissions scenarios, Singapore could see two-metre sea-level rise that would put key areas, including the financial district and offshore fuel facilities, at risk. Scientists are therefore urging a shift from incremental adaptation to building resilience against massive shocks.

Beyond immediate financial and property losses from extreme weather events, the economic risks of climate change are increasingly significant to Singapore, says the city-state’s second minister for finance Indranee Rajah.

“Climate risks are increasingly material financially,” says Rajah, who is also the second minister for national development and a minister in the prime minister’s Office, in her opening remarks at a summit held by the National University of Singapore’s Sustainable and Green Finance Institute.

Given that Singapore imports over 90% of its food supply, it is vulnerable to supply chain shocks which may arise from climate-related disruptions, she said.

“Extreme weather events may also damage critical infrastructure and disrupt port operations,” Rajah stated.

As a low-lying nation with 30% of its land less than five metres above mean sea level, much of Singapore’s critical infrastructure located along the coastline – including its airport, industrial estates, power plants, military bases and reservoirs – is at risk from rising seas. Home to one of the world’s busiest container ports, Singapore has also built its economy around its status as a global maritime hub.

In addition, Rajah said that Singapore’s natural capital, which has helped moderate urban temperatures and provide flood management for critical infrastructure, is now under “severe stress from accelerating climate change”.

Natural capital refers to assets derived from nature that provide essential societal benefits, such as clean water, flood protection, climate regulation and recreation.

“Singapore’s natural capital underpins our economic foundation, but mounting climate and physical risks threaten this foundation.”

“In response, financial markets are factoring climate and nature risks into their economic valuations,” said Rajah. “From insurance premiums reflecting flood risks, to lending rates incorporating vulnerability assessments, markets are rewarding climate resilience and penalising exposure to climate risks.”

In February, Singapore’s sustainability environment minister Grace Fu declared 2026 the “Year of Climate Adaptation” and unveiled its inaugural national adaptation plan to address heat resilience, coastal resilience and water security.

Earlier this month, the island-state also passed a law that will require government agencies and businesses occupying land along its coastlines to implement measures against rising sea levels. These could include building and maintaining sea walls or planting mangroves to prevent coastal flooding.

Limits to adaptation

However, experts are warning that adaptation is hitting its limits as the world nears climate and ecological tipping points.

Speaking at the summit, Benjamin Horton, dean of the City University of Hong Kong’s School of Energy and Environment and a contributor to several of the UN’s Intergovernmental Panel on Climate Change reports, cautions that using the language of “adaptation” gives a false sense of security.

“When you heard Grace Fu talking about this being the ‘Year of [Climate] Adaptation’, you all probably thought okay, we’re safe. We’re not going to be flooded. We’re not going to get heat waves. We’re not going to get diseases and an outbreak of dengue. Great. But that’s not reality.”

“We have crossed the temperature thresholds … that we should never cross … and there will be consequences,” said Horton.

For the past two years, temperatures have exceeded the 1.5°C limit of global warming above pre-industrial levels that was set out in the 2015 Paris Agreement.

Horton warned that breaching the 1.5°C threshold could slow down the critical Atlantic current that brings warm water from the tropics to Europe, leading to the region’s oceans freezing over, which will threaten food security and ports, and force crucial trade routes to be rerouted.

He added that increases in atmospheric and ocean temperatures are also accelerating the collapse of Antarctica’s so-called doomsday glacier, which could raise sea levels by one to two metres.

Under high-emissions scenarios, Singapore is projected to see a two metre sea-level rise which will put its financial district and its offshore petrochemical complex at risk during high tides, said Horton.

“How do you adapt to that?” asked Horton. “You can build a sea wall, but I don’t think you can build it quick enough.”

“Resilience is not adaptation,” he said. “Adaptation is about incremental change. You need to be resilient to the shocks. So you need to model the shocks. You need to know how they are going to impact people and places.”

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