Helping financial sector to be more sustainable with new initiative

New initiative aims to help direct region's capital flows towards sustainable outcomes

From left: Ms Lydia Wee, deputy chief executive of the Institute of Banking and Finance Singapore; Mr Nicholas Hadow, chairman of the Investment Management Association of Singapore; Mr Pierre-Emmanuel Brard, chief investment officer of AXA Insurance
From left: Ms Lydia Wee, deputy chief executive of the Institute of Banking and Finance Singapore; Mr Nicholas Hadow, chairman of the Investment Management Association of Singapore; Mr Pierre-Emmanuel Brard, chief investment officer of AXA Insurance Singapore and ASFI representative for the Life Insurance Association; and Mrs Ong-Ang Ai Boon, director of the Association of Banks in Singapore at the Asia Sustainable Finance Initiative (ASFI) launch. ST PHOTO: JONATHAN CHOO

Financial institutions, non-governmental organisations and academics will work together under a new initiative to help businesses be more sustainable.

The Asia Sustainable Finance Initiative (ASFI), which was launched yesterday at the Parkroyal on Pickering hotel, aims to help shift the region's financial flows towards sustainable outcomes.

It will bring together the finance industry, academia and science-based organisations to help Singapore-based financial institutions operating in the region to deepen their expertise in sustainable finance.

The World Wide Fund for Nature (WWF) is the secretariat and knowledge partner. Other knowledge partners include the Asia Investor Group on Climate Change, United Nations Environment Programme - Finance Initiative and the National University of Singapore.

The Association of Banks in Singapore, Life Insurance Association, Institute of Banking and Finance Singapore and the Singapore Exchange Regulation are among the finance sector partners.

An ASFI spokesman said: "The financial sector is crucial in creating resilient and sustainable economic growth through its ability to influence companies to adopt best practices and to direct financial flows towards sustainable development.

"As a key global financial hub, Singapore is an important conduit for capital flows into the Asia region, and as such its financial institutions have significant potential to shape resilient regional economies."

Sustainable finance is also key to addressing the region's increasing vulnerability to climate change, the degradation of land and ocean ecosystems, labour and human rights, and water risk, she added.

The initiative will focus on helping financial institutions better understand and incorporate environmental, social and governance (ESG) risks and opportunities into decision-making processes.

It will assist partners in devising standards and certification schemes and help institutions understand material, environmental and social issues so they can price risk and value companies.

The ASFI will also bring research and innovative tools so finance institutions can develop viable green solutions to create an actual impact on the environment and society.

Ms Indranee Rajah, Minister in the Prime Minister's Office and Second Minister for Finance and Education, said at the launch: "Financial institutions play an important role in influencing how capital is allocated to economic activities with sustainable development outcomes. This will facilitate decision-making... that delivers financial performance as well as positive impacts on society."

She added that institutions here have significant potential to catalyse sustainable finance in the region.

"While we are still at the early stages... we have seen some success in encouraging the use of debt capital market financing towards sustainable projects."

In 2017, developer City Developments Limited issued the first green bond in Singapore, and DBS Bank partnered Impact Investment Exchange on the world's first listed social bond, an US$8 million (S$10.9 million) Women's Livelihood Bond.

Ms Indranee said Singapore can advance deeper ESG integration within financial institutions and implement credible standards. There should also be deepened research and development in ESG products by building capabilities.

The Ministry of the Environment and Water Resources and Monetary Authority of Singapore welcomed the initiative: "Partnerships and collective action are essential to achieving sustainable development."

Ms Jeanne Stampe, head of WWF's Asia Sustainable Finance team and founder of ASFI, said: "Today's pressing environmental and social challenges threaten the... stability of Asian economies.

"By working... alongside other science-based knowledge partners, we can facilitate an orderly transition to economies that deliver well-being to all people while protecting the natural capital on which all businesses and societies depend."

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A version of this article appeared in the print edition of The Straits Times on January 22, 2019, with the headline Helping financial sector to be more sustainable. Subscribe