Change and collaboration needed to support sustainable finance
There is still a lot of room for the growth of ESG practices globally and in Asia
As we push forward into a new decade, the momentum for sustainable finance remains strong. From green bonds to sustainability-linked loans, companies now have a number of financing options that can be tied to their sustainability policy.
Data from Refinitiv reveals that global ESG (environmental, social and governance) bonds raised US$218.8 billion in 2019, a 39.4% increase from 2018. Yet despite the achievements over the past several years since the green bond first hit the global market in 2007, we are still scratching the surface of what we need to do to combat climate change.
That was one of the main messages shared by Peter Bakker, president and CEO of the World Business Council for Sustainable Development, at New World Development’s recent Sustainability Forum 2020. “Business as usual is bad. Do not think that the business that made you successful up until now will continue into the future, economically it’s going to be ever risker. The conversation now should be around how can we change the big economic systems that are happening out there in the world.”
More specifically, Bakker was referring to a business mindset change where environmental and social costs in addition to financial costs were increasingly factored into a business’s financing decisions. That positive sentiment towards sustainable financing likewise has room to grow in several key markets around the world such as in Hong Kong or Singapore.
Issuers from China, the United States and France were recorded as the most active in the 2019 green bond market with Chinese issuers taking first place last year globally raising US$22.9 billion in proceeds.
Speaking at the recent 2020 Asian Financial Forum, Paul Chan, financial secretary of the HKSAR government, highlighted a need for a policy shift towards green finance in the future. “Green bond issuance arranged in Hong Kong increased by over 200% to US$11 billion in 2018 compared to the previous year. We plan to issue more and encourage more entities to arrange financing of their green projects here in Hong Kong.” Last year, the Hong Kong government issued its inaugural US$1 billion green bond hoping to spur awareness of sustainable finance in the city.
Collaboration in the form of information sharing and guidance would also be needed to support sustainable finance in the future. “The key going forward will be how we can drive everyone in the private sector to work together with governments and policymakers on sustainable finance,” shares Tracy Wong Harris, deputy secretary general of Hong Kong’s Green Finance Association.
Speaking at the sidelines of the Sustainability Forum 2020, she explained that the handholding or close advising of companies and recent sustainability frameworks have been important in making companies comfortable in transitioning away from non-ESG practices.
The overall clarity of sustainability practices will make it easier for companies to embed the concept into their business activities. “We need to simplify sustainability, there are only three major problems in the world today, climate emergency, the loss of nature and inequality,” states Bakker.
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