Finance and ESG: how Singapore is getting ready to be sustainable in 2020 and beyond
Recently, I had the pleasure of attending a conference organized by Eco-Business: Unlocking capital for sustainability. I met a lot of fantastic and exceptionally committed people, starting with Singapore’s Minister for Environment and Water Resources, MasagosZulkifli.
Since the very first day I landed in Singapore, a year and a half ago, I have been quite impressed by the country’s ability to implement ambitious and meaningful policies. Of course, Singapore is much smaller than many countries but remains an inspiration for the world. This is because regardless of its geography, size, and density, Singapore and sustainability have always gone hand in hand. Its people constantly experiment, innovate and create concrete solutions that can benefit the rest of the world, starting with the Asian Pacific region.
Regarding global warming, however, only a few meaningful actions have been taken by governments, businesses, and citizens to significantly reduce carbon emissions and reverse the current trend.
There are many reasons for that, but both, the role of finance and short term profit ambitions are likely decisive factors. In the current environment, where short term economic returns are the only measure of performance, organizations prioritize meeting shareholders’ expectations at the expense of a long term vision and a more holistic social responsibility. It is characteristic of our human nature to discount the importance of future risks and to prioritize our short term comfort.
It’s good news is, however, that the status quo is being challenged. Financial institutions are starting to take into account CSR / ESG criteria in their investment decisions. Sure, it may be a part of their communication strategy (greenwashing) in order to maintain their reputation. But research also suggests that companies adopting CSR/ESG best practices have better long term profitability than companies who don’t, and this may become a powerful incentive for investors.
We have to acknowledge that these first steps, however necessary, are not sufficient. Too little has been done to create a paradigm shift on how to responsibly invest and run a business, and way too late, considering the urgency of global warming.
The way forward could be a global regulation of the finance industry to take into account negative externalizations. This would create an even playing field among investors and instill a sense of urgency to invest and operate in a more responsible manner.
Drawing an analogy, the Aeronautics sector is heavily regulated. Why not Finance? Why must climate safety be given less importance than an aircraft’s safety ? Yet the climate crash is here and forecasts are a real reason for actions.
The Finance sector is an essential catalyst for change. Singapore, as well as its neighboring countries, are committed to acquiring the necessary resources to support this transition in the Finance sector.
Green bonds and green loans today are useful tools, but they won’t be enough.
Sooner or later, supranational institutions will impose a global regulation. And companies that have anticipated this change will be the most profitable in the future.
At Ergapolis, we care about Singapore and its sustainability. We help you realize your sustainable development goals through training, designing CSR policies and green finance. Contact us if you have any questions.
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