SINGAPORE - Businesses must reassess their entire value chain and move away from the usual way of conducting themselves in the battle against climate change, said Minister for the Environment and Water Resources Masagos Zulkifli on Wednesday (Sept 18).
He said financial institutions also play a pivotal role in enabling action against climate change.
"Companies must factor both the risks and the opportunities of climate change into their long-term growth strategies. This means holistically reassessing the entire value chain, from production to consumption, disposal and recovery," he said.
"Although effective government policies are key to enabling and accelerating efforts to tackle climate change, the private sector must do its part, as a responsible driver of economic growth."
Mr Masagos was speaking at the fourth edition of the BNP Paribas Sustainable Future Forum at the Parkroyal on Pickering hotel. The forum is a platform for leaders in the region to discuss solutions and inspire meaningful action to tackle climate change.
He said that the first step for businesses is to be clear eyed about the impacts climate change will have on them.
For instance, a study by international non-profit organisation CDP showed that the world's largest companies face almost US$1 trillion ( S$1.4 trillion) in climate risks, with a quarter of this figure stemming from write-offs of stranded assets.
But Mr Masagos said that these climate risks also presents companies with opportunities to develop new solutions that can benefit society, such as creating clean hydrogen and ways to reuse energy.
The International Finance Corporation estimated in a study that US$20 trillion is needed in climate-related investments in Asia by 2030.
"We need to rethink our business models and processes, and early movers will have the advantage," said Mr Masagos.
He also suggested that companies can adopt an internal carbon price, which can be used as a planning tool to identify revenue opportunities and risks, while also being an incentive to be more energy efficient to reduce cost and guide investment decisions.
"According to the CDP, there has been a fourfold increase in the number of companies adopting an internal carbon price in 2014 to over 600 in 2017, with around 140 companies in Asia doing so," he said.
Besides companies, the financial sector is vital in ensuring that capital is directed to sustainable projects and meet the demand for sustainable solutions.
Mr Masagos said: "Financial institutions can leverage their vast capital networks to spur climate-friendly investments and lending and as a result, drive future growth. The global green bond market is growing at a fast clip, reaching US$168 billion in 2018, with US$48 billion issued in the Asia-Pacific."
In 2017 the Monetary Authority of Singapore (MAS) introduced the Green Bond Grant Scheme to encourage the use of capital markets instruments for green financing.
Over US$4.5 billion of green bonds have been issued in Singapore to date. The scheme was expanded this year to also include social and sustainability bonds, and was renamed as the Sustainable Bond Grant Scheme.
MAS also signed an agreement last year with the International Finance Corporation to accelerate the growth of green bond markets and build capacity for this in Asia. Singapore has held workshops to enhance the awareness of such bonds for financial institutions, companies and government agencies in the region.
Mr Masagos added that financial institutions can also adopt environmental, social and governance (ESG) principles in their investment frameworks.
"(By doing so), financial institutions send a strong signal that stakeholders across the value chain must take climate change seriously," he said.
He cited BNP Paribas as an example of a firm that works with clients to encourage sustainable business practices. Last year, the company issued the first green loan in the Asia-Pacific to a Singapore-based shipping company.
In April this year, local banks also decided to stop financing new coal plants in the region.
"This shows that we do not support investments which generate short-term profits, but harm future generations in the long run," Mr Masagos said.
"We need to muster the collective efforts of the public and private sectors, to move decisively towards a sustainable future," he added.