Asian investing institutions need help to integrate responsible investment practices into their portfolios, advocates the Asia Sustainable Finance Initiative (ASFI), which launched on Monday in Singapore.
Association spokesperson Jeanne Stampe told AsianInvestor that financial institutions,“whether sovereign wealth funds, pension funds or insurance companies, are crucial in creating resilient and sustainable economic growth through their ability to influence companies to adopt best practices and to direct financial flows towards sustainable development outcomes.”
Stampe is head of Asia sustainable finance at the Worldwide Fund for Nature (WWF) in Singapore, which is acting as the secretariat for ASFI. The ASFI platform brings together experts from the finance industry, academia and science-based organisations.
The other partners within ASFI are the Asia Investor Group on Climate Change, CDP (formerly the Carbon Disclosure Project), Global Canopy, Oxford Sustainable Finance Programme, UNEP Finance Initiative, World Resources Institute, 2° Investing, and the Centre for Governance Institutions, and Organisations at the National University of Singapore, .
“ASFI and its partners can work with asset owners directly to help them understand the type of climate and other material [Enviromental, Social, and Governance or] ESG risks they are exposed to. And it can help them understand what to look out for in the fund managers they hire to manage their money,” Stampe said.
Although no Singapore asset owners are actively involved at this stage, Stampe said, “GIC, Temasek and any sovereign wealth fund, private equity fund or private investor is welcome to be a part of this.”
Institutional investors have a key role to play in this initiative since, as Stampe said, “natural capital is not well looked after in Asia, which means that businesses, nations, societies are at risk. The finance sector has the power to drive change in these portfolio companies, which can also drive better value and ensure that their portfolios become more resilient.”
Natural capital refers to natural resources such as water, soil and air.
FIVE TRILLION DOLLARS
Sustainable finance is a critical lever to address the growing vulnerability of the region to climate change, the degradation of land and ocean ecosystems, human rights and water risk. At the same time, the shift to sustainable economies represents around $5 trillion of investment opportunities between now and 2030 in Asia alone, according to the Business and Sustainable Development Commission.
Awareness of how to go about it, though, is low among mainstream investors.
A survey last year by RS Group, a Hong Kong-based family office, showed just how low, with 75% of respondents who indicated an interest in sustainable finance signalling that they didn't know how to begin. This was identified as the primary challenge inhibiting growth in Hong Kong and asset owners, government and regulators all cited it as the most common challenge within their stakeholder group.
Unlike other impacting investing forums, ASFI will not act as a platform where projects needing money are paraded, Stampe said.
Instead, ASFI will focus on specific areas where it feels the finance sector needs to develop a deeper understanding. These include disseminating updates about the most meaningful and credible standards and certifications institutions can use to drive corporate sustainability and improve transparency.
Green finance solutions are another key area, where ASFI will support the development of solutions that have clear positive financial, environmental, and social outcomes.
“There’s good momentum in Asia now. We have seen stewardship codes emerging in Japan, Korea and Taiwan,” Stampe said.
“In Japan, the Government Pension Investment Fund has made the big step forward, and made it clear how important ESG integration is,” she said. “We have also seen that the banking sector has come up with green lending guidelines, in Malaysia for example. Indonesia now has a road map and Vietnam is introducing new codes of behaviour for corporate directors.”