Investors’ interest in sustainable finance has reached a fever pitch, with the impact investing sector doubling in size over the last 2 years, according to Global Impact Investing Network’s 2019 Report on Sizing the Impact Investing Market. As sustainable finance moves from niche to mainstream markets, it has piqued the interests of MNCs, while policymakers see an opportunity to make greater reforms to harness the financial sector’s power in unlocking the potential of sustainable finance in building a more climate-resilient future.
At the AVPN Virtual Conference 2020, I heard from public and private sector representatives across Asia, who highlighted the key challenges they face in the current sustainable financing landscape and the importance of having coherent policies and regulations to accelerate the uptake of sustainable finance. Emphasis was also laid on having open policy dialogues at local, national, and regional levels that could lead to more innovative financing approaches and efficient allocation of resources. Citing Niall O’Connor, Centre Director at the Stockholm Environmental Institute, he says that “for sustainability to scale, we must share experiences, funds and resources must be managed efficiently and ensure that broader stakeholder support is guaranteed.”
The Reform Needed for Green Investing
“Regulations have been a key driver for Sustainable Finance and ESG adoption over the last decade,” says En Lee, Head of Sustainable and Impact Investments at LGT. Yet, there is a lack of proper benchmarking in identifying ‘sustainable business practices’, resulting in the sustainable finance industry being entwined in a web of inconsistent financial structures, policy frameworks and disclosures. Businesses may see this as an opportunity to practice ‘green washing’ to receive support and investments, as Wendy Cromwell, Vice Chair of Wellington Management mentioned coming across several ‘impact bonds’ or ‘green bonds’ of varying quality which fall short of the green investing standards of the investment management firm.
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“For sustainability to scale, we must share experiences, funds and resources must be managed efficiently and ensure that broader stakeholder support is guaranteed.”
— Niall O'Connor, SEI Asia Centre Director
Towards an Enabling Environment for Sustainable Finance
In the most vulnerable, disaster-prone communities, however, economic policies embedding climate risk and green financing initiatives incentivizing sustainable investments, remain largely sporadic.
With just “0.2% of all global pandemic stimulus spending, in the world’s largest 50 economies, allocated to green policies”, Niall O’Connor, Director of the Stockholm Environmental Institute (SEI) expressed the urgency for government stimulus packages to integrate gender and social equity issues in order to address challenges of access to capital by marginal and vulnerable communities. He noted that building demand for investible sustainable financial products necessitates simplifying complex financial jargons, supported through research and capacity development across various stakeholders. He added that it required conscious initiative from the government to deploy public capital effectively to attract institutional investors who will scale up investments that support the marginal and the vulnerable communities.
Here, I share two country-specific experiences on how governments have successfully integrated climate policies into their rebuilding and resiliency plans. From mitigating climate risk in the Philippines, to new regulatory reforms in Thailand, the discussions provided deeper insights into best practices and lessons learnt from deploying green finance instruments in the respective countries.
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