A new green finance centre in Singapore promises to boost Asian corporates’ efforts to transition to the low carbon economy. The Singapore Green Finance Centre (SGFC), a joint venture between Imperial College Business School, the Lee Kong Chian School of Business at Singapore Management University (SMU) and a cohort of leading banks, aims to become a hub of research and expertise in green policy for the region’s companies, financial institutions and governments. The centre’s founding banking partners, including Bank of China, BNP Paribas, Fullerton Fund Management, Goldman Sachs, HSBC, Schroders, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation and UBS, will also have direct input into SGFC’s strategic direction.
“Banks are heavily involved and there is a lot of sell-side capability,” enthuses Professor Charles Donovan, director of Imperial College Business School’s Centre for Climate Finance and Investment. “To date, Asian corporates have been rather let off the hook when it comes to climate change. They have waited for either the EU to lead or sat on the sidelines because of US inaction. This is starting to change, and banks will increasingly push conversations with treasury teams and CFOs around their decarbonisation plans. If a company doesn’t have a story here, it will have to get one fairly soon,” he predicts.
Donovan also believes that President Xi Jinping’s recent pledge to target net zero emissions by 2060 will begin to feed into more net zero strategies amongst companies in the region. “China’s net zero target is mind boggling in its implications. It is incumbent upon all major economies to transition, and this will trickle down to corporate change too.” The newly launched centre will act as a "catalyst for embedding climate change into business strategies" as Asia works to balance sustainability and growth, adds David Fernandez, professor and director of the Sim Kee Boon Institute for Financial Economics at SMU.
A key pillar of SGFC’s work will focus on research and innovation in green finance, particularly developing climate-related data and ESG considerations to help improve the efficiency of green finance markets. The hope is the centre will begin to address challenges around the lack of data and common standards in ESG. Investors complain that regional companies' ESG data is often inaccurate or missing altogether, and many years of voluntary disclosure requirements have failed to incentivise reporting. “Companies and investors are swamped by reporting standards and the absence of a clear regulatory drive to report financial risks around climate,” says Donovan. “At the moment, standards are being mostly driven by NGOs. The big story in the next 12 months will be around credit rating agencies and regulators stepping forward with standards and norms to cut through the bluster of green washing.”
The SGFC’s focus comes against the backdrop of wider change. In recent years, stock exchanges across Asia have been trying to make ESG disclosure mandatory for listed companies. The Monetary Authority of Singapore (MAS) is encouraging local banks to adopt industry standards to enhance ESG disclosure, including completing ESG assessments for their corporate clients. Elsewhere, Singapore has rolled out carbon taxes across all industries. It will collect its first carbon tax payments this year at S$5 per ton from facilities that emit 25,000 tCO2e or more of greenhouse gases annually. In 2023 the government will review the rate, maybe increasing the tax to between S$10/tCO2e and S$15/tCO2e by 2030.
The centre will also strive to nurture talent in Singapore to support Asia’s transition to a low carbon future. Here the Institute will offer graduate-level and post-degree courses to develop a strong pipeline of green financial talent which financial institutions can tap as they expand teams and deepen green finance capabilities. “Asia could lead the world into a low carbon future. The world’s leading financial institutions see this opportunity and that’s why they are backing us,” says Donovan.