Sustainable finance key lever for net-zero transition and social stability in the face of disruption

Against the backdrop of global uncertainties, volatile markets and the rising cost of living threatening a post-pandemic recovery, the role of finance in addressing the climate crisis and ensuring social stability has become more important than ever.

About 500 leaders across government, finance, business and civic society gathered in person and virtually today for the fifth edition of Unlocking capital for sustainability, themed ‘The role of sustainable finance in a disrupted world’.

Organised by Eco-Business in partnership with United Nations Environment Programme,  the annual forum delved into wide-ranging issues from the outlook for sustainable finance in the region, ESG integration and valuation, an Asian sustainable finance taxonomy, the role of carbon markets, financing the net zero transition, and mainstreaming impact investing, among others.

The latest UN report on the Sustainable Development Goals — a collection of 17 interlinked targets adopted by all nations for a more sustainable future by 2030 — revealed that Covid-19 and the continued regression on climate action and resource use have caused the biggest slowdown in pace since the targets were set in 2015. Southeast Asia and the Pacific are particularly lagging.

Meanwhile, the world faces a growing triple planetary crisis – climate, nature, and pollution — which underlines the urgent need to align all financing flows with sustainable development, and to achieve the shared goals of a greener, more inclusive and resilient recovery.

Experts observed that while global capital markets are already supporting green finance, there needs to be more support for transition finance – where financial institutions are helping companies in high emission or hard to abate sectors are provided with financing to transition to a low carbon business model. 

Speakers also emphasised that a “great finance divide” has emerged between developed and emerging markets and that financial institutions in the region should be more active in the latter. More catalytic capital and blended finance tools are needed to mobilise capital to fund the projects and address and share the political and financial risks that come from investing in emerging markets.

At the opening of the forum, Minister Grace Fu, Ministry of Sustainability and the Environment, Singapore observed that “sustainable development is no longer a matter of regulatory compliance or government policies. The financial sector must bring heightened awareness to issues of sustainability, whether through funding of research and development of low carbon solutions, or supporting businesses in their green transition.”

“The IEA has estimated that emerging and developing economies around the world need over US$1 trillion a year in clean energy investment by 2030 to achieve net-zero emissions by 2050. This has yet to include the cost of adaptation, which the UNEP estimates to be at least US$140 billion a year. This far exceeds the resources of governments around the world. We will need technology and innovation to deliver needle-moving solutions, and private sector finance will hold the key to unlock this potential,” she added.

Steve Howard, chief sustainability officer of Temasek, also noted that the global net zero transition is an “unprecedented challenge because it is about restructuring everything”.

“It is reimagining industry, reimagining our energy systems, mobility, the built environment, or food systems. But it is also a fantastic opportunity as it will drive new businesses and innovation. So it’s both a critical threat and opportunity,” he added.

Noting the tough macroeconomic environment, Jessica Cheam, founder and managing director at Eco-Business noted that “in these tough times, it is very tempting to revert to short-termism and think of only what lies in the immediate term, but that puts us in a dangerous place because long after these crises are over – we will still be faced with the existential crisis of climate change and of rising inequality which is threatening the long term security of our natural ecosystems and societies.”

“This is why conversations like today’s gathering are important – to continue to build on the momentum achieved in the capital markets on responsible investments and to take it even further,” she added.

Regional progress

 This year’s forum featured more than 50 speakers across the globe, beginning with four regional virtual dialogues spanning Malaysia, Indonesia, Philippines and India, and culminated in a two-day hybrid event held in Singapore.

As a pre-event curtain raiser, Eco-Business in partnership with Bank of Singapore also hosted a closed-door dialogue Through the lens of impact and return: Investing in Asia with family offices and investors on 20 September at Raffles Arcade.

Delegates also attended a breakfast briefing hosted in partnership with Rebound Plastics Exchange on ‘Innovations and investible opportunities in recycled plastics.

Mr Mike Ng, Head, Sustainability Office, Global Wholesale Banking, OCBC Bank, said, “Now more than ever, the world is experiencing the impact of climate change – droughts, floods, heatwaves, and extreme weather. The recent energy crisis and the restarting of activities as economies open up have resulted in emission spikes. Against this light, it is important that the sustainable finance agenda does not lose momentum, and green finance needs to be at the forefront of a global economy facing years of climate and financial uncertainty.

“This forum has served as a timely platform for industry players to take stock of their progress, from the successes and challenges of mobilising capital for a more sustainable world, to sharing ideas on how to support and accelerate sustainability efforts. As a leading Asian bank, we are very mindful of our role as a catalyst for positive change – through financing renewable energy and other green infrastructure projects and promoting sustainable investments, among others. Together with our customers and other like-minded organisations, including those who participated in this forum, we will continue to make a unified push for a sustainable future.”

Eric Lim, Chief Sustainability Officer, UOB, said: “As a leading financial institution in Asia, UOB has a responsibility to support our customers in the real economy as they transition to a net zero economy. It is not about chasing numbers; we are focused on working together with our customers to create genuine and meaningful impact. This way, we can help bridge financial capital with the region’s needs for investments to drive sustainable development and forge our net zero future.”

Atty. Federico Tancongco, Senior Vice President and Chief Compliance Officer for Sustainability of BDO Unibank, noted that since 2010, the bank has been on the lookout for renewable energy projects and “have actively engaged with project proponents who bring their renewable energy projects to us, since we consider this a priority sector in financing”.

“It is for this reason that we are strategic partners for this event. We see our participation in global conversations as a way to champion sustainable development for the Philippines through sustainable finance, and two, to publicly announce BDO’s approach to energy transition finance,” he added.

Liew Wei Chee, Managing Partner, South and South East Asia, ERM noted that “the relentless pace of ESG imperatives is infiltrating companies’ playbook, from strategy, finance, mergers & acquisitions to operations”.

“CFOs, the financial institutions, the investors and private equity firms are in an immense position of change to take charge, to identify material opportunities and risks to optimise ESG performance, advance with ESG-first approach across its transactions and accelerate sustainable finance. The forum is timely to convene all the stakeholders to exchange insights and work towards securing a sustainable yet equitable future,” he added.

Jack Lin, President of MioTech, emphasised the critical role of data to make better decisions: “As a leading ESG data and technology provider in Asia-Pacific, we are excited to bring AI-powered data solutions to solve the data-related sustainability challenges many corporations and financial institutions face. Amid the global and regional shift in green financial and carbon markets, we recognize new opportunities arise for industry players to pioneer innovative solutions. Witnessing the growing demand, we made the recent move to expand in Singapore. We look forward to bringing ESG data management and analytics to accelerate sustainable finance in the region. ”

Closing the forum, Selwin Charles Hart, Special Adviser to the Secretary-General on Climate Action and Just Transition, Executive Office of the Secretary-General, United Nations said: “We need to urgently address risk perception around finance for renewables in the developing world. High risk perceptions means higher premiums, and this increases the cost of capital for renewable energy investments in the developing world. This, in turn, delays the transition of energy systems. We need to break this cycle.”

“Shareholders have the power to make [government and multilateral development banks] fit for purpose. They must give management the mandate to change business models, to take more risks and be more creative in developing and delivering the support and investments needed. This also means bolstering their toolbox of instruments and expanding their capital base to mobilize private finance at pace and scale.”

The hybrid Unlocking capital for sustainability 2022 was held at Four Seasons Hotel in Singapore for 100 in-person guests and streamed virtually to more than 400 government, financial leaders and civic society around the world.

The event’s strategic partners include UOB, OCBC Bank, BDO Unibank, and supporting partners are ERM, MioTech and Rebound Plastics Exchange. Its outreach partners included IFC, EU-Asean Business council, Climate Governance Malaysia, Fair Finance Asia, Global Reporting Initiative, GRESB, Global Compact Network Singapore, Jakarta Investment Centre, UNDP, World Climate Foundation and ESG Book.