Despite sustainability initiatives reaching a fever pitch this year, some may still dismiss the dominance of climate conversations as mere euphoria.
But the hype itself is a “necessary step” in furthering the green agenda today, says Kwok Quek Sin, executive director of green FinTech at the Monetary Authority of Singapore (MAS). “In the process of gaining awareness and mainstream interest, we must take advantage of that.”
However, hype cannot last forever and there is a more critical factor at play. “The issue isn’t the lack of awareness, but whether there are immediate motivations to act,” says Kwok, a former Government Technology Agency (GovTech) director who moved to lead MAS’s green FinTech division in May.
Green or sustainable finance is the practice of integrating environmental, social and governance (ESG) criteria into financial services to bring about sustainable development outcomes, including mitigating and adapting to the adverse effects of climate change.
This sector is seeing growing interest from both institutions and retail investors. Speaking at the “Green and Sustainable Finance: Investments, Banking and FinTech” webinar organised by the Nanyang Business School on Aug 26, Kwok cites a survey by Fidelity International published in June, which reported that 57% of Singaporeans expressed interest in saving and investing more sustainably.
See: Chinese investors most keen on ESG, Singaporeans least aware: Fidelity
At the same time, 66% of investors here said they would consider sustainable investing if it was more accessible.
Aside from retail investors, Kwok acknowledges a degree of “friction” between corporates and regulatory bodies, as the financial industry figures out how best to implement sustainability reporting, some of which are being mandated.
“Things are unclear. Examples [include] reporting standards [and] taxonomies, and we are all trying to figure things out along the way. International standards organisations and authorities are trying to agree on a certain alignment.”
“But we can’t wait for everything to be settled before starting anything. So, we are in a state where there are certain things that we need to do, while other things [may involve] a lot of moving parts, and also a lot of inefficiency,” he continues.
“We want to work with the FinTech industry to really look at how we can remove all this friction using technology.”
See: ESG: Doing good, and we’ve been doing it a while
See also: NUS, MAS form new green finance institute, ready by end-2021
See also: MAS sets up sustainability group, appoints chief sustainability officer
Apart from financial institutions and listed companies, many corporations are already submitting financial reports and non-financial disclosures to regulators. “It is not unimaginable that this will be required.”
Today, these expectations for non-financial reports extend beyond the scope of the regulators, says Kwok. “When applying for a loan facility, banks require disclosures as well. If you don’t do it or you ignore it, it means that your access to those loans might eventually be more and more limited. We know of European countries that are setting requirements for procurement, saying: ‘If you want to be a vendor of mine, you have to make disclosures to me.’”
He also cites former BlackRock head of sustainability investing Tariq Fancy, who has urged governments to pick up the mantle of climate action through a top-down approach.
Formerly one of the sector’s top evangelists, Fancy himself had — on Aug 20 — published three essays criticising the financial industry for overstating the impact of sustainable investing.
“I suspected that every time people read the latest such headline about guarding against climate change-related risks in the financial system, they mistakenly believed that these efforts were helpful in the fight against climate change itself,” writes Fancy on publishing platform Medium.
See: BlackRock’s Fink urges World Bank, IMF overhaul for green era
See also: Temasek, BlackRock commit US$600 mil for partnership targeting decarbonisation investments
Fancy now says that financial institutions are simply pushing ESG products for their higher fees, when real change can only come from the political sphere. “Unfortunately, protecting an investment portfolio from the disastrous effects of climate change is not the same thing as preventing those disastrous effects from occurring in the first place,” adds Fancy.
“[Fancy] has been quite vocal that what we need are systemic solutions at the government policy level, beginning with carbon pricing and more aggressive regulations, to put a stop to high-carbon emission industries and businesses,” says Kwok.
More regulations will encourage errant companies to adopt ESG practices, says Kwok. Those regulations — like carbon pricing — need to be implemented gradually to ensure a smooth transition, without causing a sudden collapse of industries.
Such regulations can only be effective if they are implemented consistently across all jurisdictions, he adds. “How much we use policy as a market corrector or deterrence and how much we deliver it to the market forces is a complex question that cannot be answered today on this forum.”
Photos: Bloomberg
