Jumping Into The ESG Bandwagon
SME Magazine Singapore|Issue 37, 2021
When it comes to environmental, social, and governance (ESG) investment, Asian banks are still lagging behind their European counterparts. However,some are already taking concrete ESG actions, with Japan, Singapore and Malaysia slightly ahead of the other Asian markets.
Dafizeck Daud

Europe is frequently hailed as the leader in ESG transaction – in part due to a raft of legislation that has prompted change – and Asian banks look to their European peers as examples of best practice. While European banks have already jumped on the ESG bandwagon, Asia is close to catching up.

The biggest driver is the investor community whose expectations are having an impact on banks. There are moves in the region currently to put mandatory ESG disclosure requirements in place, for instance.

Nature-based hazards such a climate change, poses a serious threat. According to the Intergovernmental Panel on Climate Change, global surface temperatures will continue to rise, passing 1.5 degrees Celsius and two degrees Celsius by 2030 unless emissions are drastically reduced. Extreme weather and natural disasters, accelerating biodiversity loss and economic instability are already happening today.

While climate change poses a significant threat to the region, it also presents significant opportunities for green financing to flourish, and experts see significant demand for new investments to decarbonise economies going.

Singapore’s financial sector is taking incremental steps to turn their portfolios green and play their part in the fight against climate change. While the effects of climate change are felt globally, Southeast Asia is expected to sustain a greater economic impact than other regions. Analysts note that banks in Singapore have come out and made public commitments towards not only managing carbon emissions and sustainability programmes for their own operations, but also making commitments towards green financing. However, they point out that the amount of sustainability-linked loans issued by the banks still pales in comparison to their overall loan book.

Being a key financial centre, Singapore banks are well positioned to plug some of these massive financing gap in more sustainable ways and strong regulatory support and government-led incentives have helped the growth of green finance in Singapore.

For instance, the Monetary Authority of Singapore launched the US$2 billion green investments programme to invest in public market strategies that have a strong green focus in November 2020.

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