What gets measured: how investors approach climate and metrics

12 October 2022

Climate Governance Malaysia

Host:

Climate Governance Malaysia in collaboration with ASEAN Climate Governance Network

Watch the full session

Moderator:

Terence Quek, CEO, Singapore Institute of Directors

Keynote Speaker:

Hendrik Rosenthal, Director, Group Sustainability, CLP Holdings Limited

Panellists:

  • Blake Goud, CEO, RFI Foundation
  • Anshari Rahman, Vice President, Strategy & Development, GenZero
  • Dr William Yu, Founder & CEO, World Green Organisation (WGO)
  • Miranda Carr, Executive Director, Global Head of Applied ESG & Climate Research, MSCI

The short-term outlook of the financial sector will prevent sector players from seeing the cost of the risks of climate change. The current challenges faced by the corporate sectors include the lack of data in the social and environmental dimensions to do further analysis for measurement, and the lack of requirements to conduct a full and effective impact assessment methodology. Another challenge is the lack of knowledge and confidence among financial specialists to make an informed capital allocation decision.  

Board members need to think about how the short-term outlook can drive the company’s capital towards a long-term sustainable outcome. There are three factors that hinder the alignment of the financial systems with the requirements for transition to a lower carbon economy:

  1. Price vs cost. How to quantify? 
  2. The level of connection between the long-term impact and the short-term decisions
  3. Instability of the financial system

There are three items that corporate can potentially look at when it comes to measurements:

  1. Disclosure 
  2. Net zero – How do you set a net zero target that is science-based and that’s credible?
  3. How do you go beyond your direct abatement within your value chain?

The important thing with measurement is to make sure that companies are measuring the right things. Companies have to understand what their counterparts and stakeholders care about the most.  

How to help the board to understand the complexity of measurements and metrics 

  1. Building awareness among board members. Involve third-party experts to give some objective comments on the current situation, the level of impact in the future, and the possible indication in their future performance. 
  2. Get sensible data for basic analysis to evaluate the impact and opportunities for the board to make informed decisions.
  3. Set the pathway. Lay down the roadmap of carbon reduction in terms of ESG management, related integration into the existing enterprise risk management, and the enterprise risk management (ERM) system for boards to evaluate. The board needs to know their level of commitment in terms of financial investment.
  4. The board needs to know the company’s carbon footprint.

Questions the board may want to bring up at the next board meeting as a way to take action

  1. What is the price of inaction? 
  2. Who has ultimate responsibility for putting their target into action?
  3. How is accountability enforced through the process? 
  4. What is the future composition of the board members and the sustainability committee under the board?

Ambition to Action: Key actions for boards

When it comes to measurements corporations must look at: 

1. What investors do you have? 

2. What metrics do you have in terms of their commitments that might jeopardise their investment or financing of your business? 

3. What is your own relative balance between direct emissions that are directly related to your operations, whether that’s direct from your production or the electricity you’re using?

4. How much is built into the value chain? Prioritisation is very important because the International Sustainability Standards Board (ISSB) standards will require all emissions across the value chain to be disclosed and it is quite substantial in terms of a company’s own internal value chain.

This session summary was provided by the hosts.

Back to all sessions