Keynote Speech by Ms Indranee Rajah, Minister in the Prime Minister's Office, Second Minister for Finance and Education, at the Launch of WWF Asia Sustainable Finance Initiative (ASFI), on 21 January 2019, at Parkroyal on Pickering21 Jan 2019
Advancing Sustainable Financing with ASFI
Mr Joseph Koh, Chairman, WWF,
Ms Yeo Yun Lin, CEO and CFO, WWF,
Ms Jeanne Stampe, Head, Asia Sustainable Finance, WWF,
Ladies and Gentlemen,
1. Thank you very much for inviting me to be a part of this event. I think that it is a very important topic and so when I was invited, I greatly welcomed the opportunity to be able to address all of you. I would like to start by expressing my appreciation to Jeanne for the insightful introduction to the ASFI.
a. Many of us here are familiar with Jeanne, and her work in advocating sustainable finance causes. I am sure that I speak on behalf of all of us, when I say we look forward to her work in heading the ASFI in Singapore.
b. Building on what Jeanne has just shared, I want to focus on why sustainable financing is important, and how industry-led initiatives like the ASFI can support financial institutions to accelerate our path towards sustainable growth.
2. First, let me start out by setting out the operating context.
3. A month ago in Katowice, Poland, nearly 200 countries came together to affirm our collective will to address the urgent issue of climate change and they agreed on the guidelines to implement the Paris Agreement.
4. Just last week, the World Economic Forum (WEF) released their latest edition of the Global Risks Report which is an assessment of the global risks by almost 1,000 decision makers from academia, civil society, public and private sector. Four out of the top five risks highlighted in this report in terms of its impact on several countries or industries were environmental issues. This is the third consecutive year that environmental threats have dominated the global risk landscape.
5. To illustrate the impact of climate change in economic terms, based on estimates by reinsurance company Swiss Re, the total cost of natural and man-made disasters in the past two years amounted to over US$500 billion.
6. These developments show us that there is pressing need to turn aspiration into action. We need to channel our resources effectively into concrete steps towards sustainable growth outcomes. And we need to do this fast.
Why is sustainable financing important?
7. The financial sector is a powerful player to drive the required change; it has significant weight and reach in the global economy.
a. In particular, financial institutions, play an important role in influencing how capital is allocated to economic activities with sustainable development outcomes.
b. This will facilitate decision-making in sustainable investment that delivers financial performance as well as positive impacts on society.
c. As sustainable finance plays a more significant role in business and investment decisions, it will also accelerate the pace of sustainable growth.
8. As a financial centre, financial institutions in Singapore have significant potential to catalyse sustainable finance in the region.
a. While we are still at the early stages of mainstreaming the integration of sustainability into finance, we have seen some success in encouraging the use of debt capital market financing towards sustainable projects.
b. We saw the issuance of our first green bond in April 2017 by one of Singapore’s largest developers - City Developments Limited. A few months later in July 2017, DBS partnered Impact Investment Exchange (IIX), listing on Singapore Exchange (SGX) the world’s first listed social bond, an US$8 million Women’s Livelihood Bond.
i. This was to be the first of a series of bonds targeting a total of US$100 million aimed at empowering one million underserved women in Asia to transition from subsistence to sustainable livelihoods.
ii. The first bond had exceeded the target goals for its first year and IIX partnered with DBS again on a second bond issuance of the same size in September 2018.
c. Over the years, we have also built a strong ecosystem of investment managers who possess significant expertise in investing into Asia, many of whom are actively exploring the integration of environmental, social and governmental, or “ESG”, considerations with Asian investment strategies.
9. I am heartened that WWF sees the potential in leveraging Singapore to catalyse the regional financial sector’s drive towards sustainable development, and has decided to base the ASFI in Singapore.
What this means for the path ahead?
10. With the ASFI based here, financial institutions in Singapore and the region are well-positioned to benefit from the ASFI and to make sustainable finance one of their core businesses, especially by helping investors realise the intangible value in sustainable development.
11. There are three ways we can do this. First, by advancing deeper ESG integration within our financial institutions and implementing credible standards.
a. This requires taking a consistent and transparent approach towards the adoption of definitions and standards. This will build credibility and thereby improve investor confidence for greater take up of sustainable financing.
b. This approach, while still in its nascent stage, has delivered some good results for our banking sector and capital markets.
i. For example, our banks have been able to identify investment activities that pose higher risk to the environment, and integrate responsible financing practices into their business models in Singapore. They have done so by building on the banking industry’s Guidelines on Responsible Financing issued in 2015.
ii. In our capital market, listed companies on the Singapore Exchange (SGX) had just completed their first round of sustainability reporting in 2018. This disclosure requirement forms the first step in providing investors with the necessary information to incorporate the companies’ management of ESG issues into their investment decisions.
12. Second, deepening research and development in ESG products by building expertise and capabilities.
a. We have embarked on a similar effort in our insurance sector to quantify and model climate and environmental risks, especially in the Southeast Asian region.
i. For example, Nanyang Technological University’s (NTU) Institute of Catastrophic Risk Management (ICRM) is leading a project to establish a Natural Catastrophe Data Analytics Exchange, which aims to create a comprehensive and interactive economic loss database for natural catastrophes.
b. Similarly, as a centralised knowledge hub, ASFI will help financial institutions bridge existing gaps in data and better employ available tools and resources to factor in Asia-related considerations when accounting for environmental and social risks.
c. Financial institutions are better empowered to act decisively on sustainable finance solutions only when the requisite capabilities to understand ESG risks and implications have been adequately built up.
13. Third, we can strengthen partnerships and explore collaborative projects to realise the full potential of sustainable financing.
a. We should tap on multi-stakeholder engagement channels at ASFI which bring together various stakeholders from the finance industry, government, academia, science-based organizations and civil society to collectively develop, promote, and coordinate best practice sustainable finance initiatives.
14. So, I am encouraged by our close and long-standing partnership with the WWF to raise awareness on sustainable finance and to advance the adoption of sustainable finance practices in our financial sector.
15. At the same time, I am reminded that the WWF was set up almost 60 years ago to bridge the gap between the collective desire to protect the environment and the lack of financial support to do so.
16. As an organisation with its founding roots as an international fundraiser and collaborator to bring together existing groups and financial support to a conservation movement on a worldwide scale, I believe the WWF will continue to pioneer change in our finance industry and advance the agenda of sustainable financing; just as it advocated support to protect the environment nearly 60 years ago, well ahead of its time.
17. WWF’s efforts are only one part of the solution. Without your partnership and support, it will be difficult to truly implement sustainable financing and effect real change.
18. So I would urge everyone to play your part in advancing the role of sustainable finance and to leverage industry-led initiatives like the ASFI to accelerate the transformation of economic opportunities into results for sustainable growth.
19. With that, I wish you all a fruitful and engaging afternoon of discussions ahead.
20. Thank you very much.