A revolution for responsible investment, or an unrealistic vision? Grounds for real change or greenwashing? When it comes to the surge in sustainable finance across Southeast Asia, the camp is still split. While some investors view ESG as a post-pandemic bubble, a recent survey revealed a 63% majority believe that all funds will incorporate environmental, social, and governance factors within the next five years.
Speaking from over a decade in experience specializing in sustainability advisory and ESG reporting, Joan Yap, ESG consultant shares her top predictions for its next phase.
Accountability = action
I believe that governments, corporations and individuals should be responsible and accountable for the activities and behaviors in using the earth’s resources and fair treatment of vulnerable groups to create a sustainable future for all. Capitalism is about making profits. Sustainability is about long-term benefits for all stakeholders. A balance must be reached to achieve both goals.
In the “new normal”, business as usual is unsustainable
One of the major impacts of the pandemic was it highlighted the dependency on limited resources and the unsustainability of “business as usual”. Now that we are emerging into this ‘new normal’, there is a greater awareness amongst consumers and investors of the need to change. Greater attention and investment towards clear social and environmental infrastructure need to happen fast if businesses – and we – are to survive. Greenwashing exists, but greenwashing happened before the pandemic. There will always be cases.
Getting ESG investment should be a three-step strategy
- Have a compelling story to capitalize ESG
- Find the right investors
- Get the right team to make the ESG idea work out
Clear KPI’s remain a challenge
Clear targets and KPIs must be set at the beginning. It’s a constant challenge. The solution probably comes when ESG disclosures can be standardized. [In the meantime], the UN Principles for Responsible Investment (PRI) are the best guidelines for investors to integrate ESG considerations into an investment portfolio.
Europe had a head start, but Asia is catching up
Europe embraced ESG earlier and has a clear headstart. Asia has to – and is – getting up to speed in ESG commitments and actions.
And in the next generation, governments – and China – will set the pace
Government commitment and incentives lead by example, through active partnerships with NGOs, private sectors and with the population.
In the next few years, the larger economies like China will take the lead. ASEAN will work together to help member countries to achieve sustainability development goals (SDG’s). Financial centres in Singapore, Japan, Australia will promote green financial products. And the Asian ESG market will grow.
Joan Yap is currently an ESG consultant at Singapore Consultancy Pte.