Climate Governance Malaysia in collaboration with ASEAN Climate Governance Network
Kulvech Janvatanavit, CEO, The Thai Institute of Directors Association, Thailand
Natasha Landell-Mills, Partner and Head of Stewardship, Sarasin & Partners
- Ephyro Luis B Amatong, Advisor to the Chair of the ASEAN Capital Markets Forum (ACMF) and Consultant for the IFC/Sustainable Banking and Finance Network (SBFN), Philippines
- Prof. Veronique J A Lafon-Vinais, Associate Professor of Business Education & Senior Lecturer of Department of Finance, The Hong Kong University of Science and Technology, Hong Kong
- Dr Agnes K Y Tai, Director of Great Glory Investment Corporation and Head of Sustainability & Advisory of Arta Asset Management Limited, Hong Kong
The climate crisis is not just an environmental phenomenon; it is a social imperative demanding an economic transformation across all sectors. Both physical and transition risks are profoundly changing the landscape companies operate in, so boards need to adapt and demonstrate how their businesses will thrive by delivering solutions.
Green finance is a way to encourage businesses to move to a responsible pathway towards a lower carbon future, as well as to discourage further contribution to a high carbon future. Essentially, investors, government and now customers want to discourage companies and businesses from continuing to contribute to climate change. They encourage companies and businesses to mitigate the risk of climate by moving towards a low-carbon future and one way to do that is to provide adequate financing for transition.
The government and regulators play an important role in the development of green finance. One of the roles is to provide standardization in taxonomy and standards across countries. There is a huge amount of work that has been accomplished towards providing taxonomy, standard and convergence between different regulators. The ASEAN regulators such as the Capital Market Forum, which is composed of all the Capital Market Regulators in ASEAN, have launched a number of initiatives. These include the introduction of the ASEAN Green Social and Sustainability Bond Standards in 2017 and 2018, the launch of Sustainable Capital Market Roadmap in 2020 and recently, at COP 26 in 2021, the issuance of Version 1 of the ASEAN taxonomy for sustainable finance.
Regulators are among the stakeholders that want to accelerate the transition on climate change, but regulators want the transition to be affordable, just and orderly. In the value chain of the transition, no one should be left behind, including the SMEs. A transition that all countries and sectors of society can be part of is the objective of the regulators and private sector partners.
Ambition to Action: Key actions for boards
Currently, investors are making ESG or climate-oriented theme investment mandatory in order to help corporate to decarbonise. Thus, companies must do the following:
1. Mindset change, especially in Asia. The current report from Bloomberg found that less than 50 Hong Kong companies signed up for a science-based target. The mindset has not immediately shifted to adopting and embracing climate and ESG as an integral part of doing business.
2. Board Competency level: Initiatives like Climate Governance Initiative play an important role. Training modules and world-class research will help the boards to understand how to incorporate and how to do strategy, policy and how to deliver. Climate literacy is not enough, as it will only focus on compliance, but climate leadership will push the agenda forward.
3. Capacity & capability: This is a significant barrier. Currently, there is insufficient capacity and capability in Asia for sustainable finance, and ISSB is going to be acquiring assurance. The shift from limited assurance to full-blown assurance requires a great deal of capacity in order to respond as well as data collection inside corporate bodies.
This session summary was provided by the hosts.