Keynote Speech by Ms Indranee Rajah, Minister in The Prime Minister's Office, Second Minister for Finance, at The International Bar Association Asia Pacific Regional Forum-Litigating in The Asia Pacific Region, 1 September 2022, at The Raffles Hotel01 Sep 2022
Ladies and Gentlemen,
1. It gives me great pleasure to join you in-person for this IBA dinner this evening. Let me begin by extending a warm welcome to all and in particular those who have travelled to Singapore from abroad.
2. I would like to commend IBA for organising this event. You managed to time it perfectly to coincide with the relaxation of our measures. As of Monday – just 4 days ago - wearing of masks is no longer mandatory. With 93% of our population vaccinated and a carefully calibrated pandemic exit strategy, executed in phases and with an eye to ensuring that our hospitals and healthcare sector are not overwhelmed even as numbers rise and fall, we are now able to open up again for international events such as these. So Singapore is very much back in business!
3. IBA conferences are an excellent platform for the global litigation community to come together and reflect on the trends and developments affecting the legal sector. Your conference theme – litigating in the Asia Pacific Region – is particularly relevant as, pandemic notwithstanding, Asia is set to be the fastest growing region in the next decade.
The Asian share of global GDP is projected to exceed 50% by 2030. The level of investments and economic activities in Asia are expected to see a healthy increase. It is the nature of things that demand for legal services and dispute resolution will inevitably follow.
4. While there are many important trends and developments with implications for the legal sector, tonight I would like to focus on just one – which is climate change: what is on the horizon, what it means for lawyers and how you can make a difference.
URGENCY OF CLIMATE CHANGE
5. Climate change is the most urgent existential challenge of our lifetime. It is no exaggeration to say that humanity’s survival is at stake. Every day we read reports on how communities and countries are affected by climate change – with extreme outcomes from the recent floods in Pakistan to droughts in other parts of the world. Delicate ecosystems and biodiversity are at risk, some already irretrievably damaged. Rising sea levels from melting glaciers are putting low lying countries at risk – Singapore included. Unchecked environmental degradation such as deforestation has an adverse impact on the climate and renders us increasingly vulnerable.
6. At the UN Climate Change Conference in Glasgow (COP26), participants were urged to aim for net zero emissions by mid-century, to keep global warming within 1.5 degrees Celsius above pre-industrial levels.
7. For that to happen, the world has to reduce carbon emissions and make sustainability a priority. The Glasgow Financial Alliance for Net Zero (GFANZ) estimates that US$125 trillion of capital investment will be required globally to transform economies and achieve net zero emissions by 2050.
8. This requires action from all. It begins with governments but the responsibility for action extends to all, including professional services. Lawyers, too therefore are at the forefront of this battle.
9. On the government front, different countries have different strategies and action plans. Tonight, let me share with you what Singapore is doing.
10. Last year, we launched the Singapore Green Plan 2030, a national sustainability movement which seeks to rally bold and collective action to tackle climate change. The Green Plan charts ambitious and concrete targets over the next few years, strengthening Singapore’s commitments under the UN’s 2030 Sustainable Development Agenda and Paris Agreement, and positioning us to achieve our long-term net zero emissions aspiration by or around mid-century.
11. Under the SG Green plan, we will:
- move towards green and renewable energy, including hydrogen
- Generate a green economy and leverage sustainability as a engine for growth
- Attract investments that are best in class in terms of carbon and energy efficiency
- Implement appropriate carbon tax policies
- Develop Singapore as a carbon services hub
- Grow Singapore as a centre for green finance and facilitate the green transition
- Strengthen our position as an R&D centre for sustainability solutions
- Develop and trial new technologies for carbon capture, utilisation and storage.
- Produce 30% of our nutritional needs locally by 2030, through local agriculture, aquaculture, urban farming and R&D into food production.
- Build sustainable infrastructure and a green built environment.
- Transform from a Garden City to a City in Nature.
12. This list is by no means exhaustive, but it will give you an idea of our commitment and ambitions. You can also glean from the list that there will be plenty of opportunity for legal work.
13. Which brings me to the next part of my speech, which is what opportunities does the drive for sustainability offer lawyers, and how you can make a difference.
OPPORTUNITIES ARISING FROM THE DRIVE FOR SUSTAINABILITY
14. We see sustainability as a new engine of growth that offers opportunities for professional services across the board, including legal services.
15. First, regulatory and advisory work. As the push for sustainability gains pace there will be new regulation, standards and requirements. All this should be music to the ears of lawyers as this means that clients will come to you for advice. Many firms are setting up sustainability practice areas or teams. Those who haven’t done so should certainly be thinking about it. Staying abreast of developments in this area and the fast evolving regulatory space will be crucial in order to help your clients. There will also be clients who are reluctant to decarbonise or move away from environmentally unfriendly business practices and models. You can in your advisory capacities encourage them to take a more sustainable path. One major obstacle to change is costs; the transition to being green is not cheap. If that is the problem consider how to work with accountants and other consultants to help your clients devise more cost effective ways becoming green and sustainable.
16. Second, green financing. With the heightened concerns on climate change risks, investors’ appetite for sustainable investments is growing, driving a broad range of new products and services. New laws, regulations and standards on green finance are evolving.
17. Today, Singapore is the largest sustainable finance market in SEA, accounting for about 50% of sustainable debt issuances cumulatively. The Monetary Authority of Singapore (MAS) has been actively working with industry stakeholders to broaden and deepen our sustainable finance initiatives and capabilities.
18. Earlier this year, we launched the Singapore Green Bond Framework to ensure that green bonds issued in Singapore meet the requisite quality and governance benchmarks for green bonds. The framework will apply to government bonds. In Budget 2022, the Singapore government announced that our public sector will issue up to S$35 billion worth of green bonds by 2030. These public sector green bond issuances will pave the way for greater private sector green finance activity.
19. Lawyers will play an important role in helping lenders and borrowers understand what it means to be sustainable in their relevant sectors, and in applying sustainability financing principles, industry standards and frameworks to guide the structuring of transactions.
20. Third, sustainable infrastructure. ADB estimates that USD$1.7 trillion of annual investment is required for Asia to meet its demand for infrastructure. Climate change and the pandemic have accelerated the demand for renewable energies and sustainable infrastructure to aid the economy and fulfil new investor interests in ESG-compliant assets. Lawyers with expertise in sustainability are very much in demand to advise on the legal issues related to the building and development of sustainable projects including energy efficiency, renewables, green buildings, water resources and preservation of natural resources.
21. Fourth, ESG reporting. Climate change has widespread financial impacts, and organisations which engage in unsustainable practices are less likely to survive the transition to a lower-carbon economy. Investors, lenders, and insurance underwriters therefore need reliable information on how companies are preparing for a lower-carbon economy as those engaging in unsustainable practices may not be viable in the long-run. Governments are enacting regulations on ESG disclosures to provide greater transparency for investors. In Singapore, MAS and the Singapore Exchange (SGX) are stepping up efforts to strengthen the comparability and reliability of sustainability-related disclosures.
a. Listed companies will be required to disclose their climate-related risks based on TCFD recommendations from 2023
b. Mandatory climate-related disclosures for major financial institutions will kick in later but reference the ISSB standard
c. From 2024, climate reporting is mandatory for issuers in the financial industry, agriculture, food and forest products industry and energy industry. Other issuers must conduct climate reporting on a comply or explain basis.
Clients will inevitably need lawyers for advice on disclosure requirements and ESG reporting. It behoves lawyers to be well-versed in current various ESG frameworks and requirements, and keep pace with ESG developments, in order to help organisations with their ESG assessment and compliance.
22. Fifth, climate litigation. This is an area of litigation that is growing in prominence. It includes a wide array of cases, from greenwashing to investor-state disputes. As such claims add another layer of risk for companies and governments, lawyers will be required to deal with such disputes through the additional lens of climate change.
23. Let me highlight some examples of climate litigation that have become more prominent.
24. As the demand for eco-friendly products and services grows, the risk of companies overstating their sustainability credentials to attract and retain customers and investors will grow as well.
25. In the consumer space, businesses are shaping their marketing messages to appeal to environmentally conscious consumers. While many businesses have made authentic efforts to be sustainable, some engage in aggressive misleading marketing as to their green credentials. A study by the UK Competition and Markets Authority and the Netherlands Authority for Consumers and Markets found that as much as 40% of the 500 selected websites could be making misleading marketing claims. In Asia, which has the fastest growing middle class and is thus also the fastest growing consumer market, we can expect that this will be a potential growth area for litigation.
26. In the financial services sector, as ESG reporting obligations for firms continue to expand across jurisdictions, so too will the risk of greenwashing claims by shareholders, investors and regulators. In the UK, it is predicted that the number of investor claims against listed companies for greenwashing is likely to grow. In the US, the enhanced disclosures for issuers proposed by the SEC will open up the pathway to litigation. Investors are bringing a variety of claims around all aspects of ESG. Cases brought by regulators too are expected to increase. Give that Asian jurisdictions sharpening their ESG focus, these kinds of disputes can be expected to grow in Asia as well.
27. Greenwashing needs to be stamped out. Left unchecked, companies that practice greenwashing get to enjoy climate incentives and avoid penalties, and unfairly compete against firms which incur costs to be genuinely green. Greenwashing is ubiquitous in many industries in the region, and tackling this problem is imperative if we are to meet our climate change obligations. Lawyers can play an important role in exposing and taking enforcement action against greenwashing.
28. Another potential growth area is climate related investor-state disputes, because countries’ new climate commitments may be at odds with old contractual obligations. For example, it is widely accepted that we must reduce carbon emissions from fossil fuels in order to prevent global temperatures from rising. However, cases show that international investment treaties continue to protect investments in fossil fuels. For example, Grenada enacted legislation to comply with its commitments under the Paris Agreement and end the monopoly of a fossil fuel energy provider. However, it was found that the energy restructuring legislation violated the investment contract.
29. Although the new generation of investment treaties contain progressive features which recognize the host states’ explicit right to regulate and investors’ environmental obligations (for example the Singapore-Indonesia Bilateral Investment Treaty) we may see more of such disputes in cases where the old forms of investment contracts still apply.
WALKING THE TALK IN SUSTAINABILITY
30. There is also opportunity for lawyers to walk the talk in day-to-day practice. Law firms’ biggest sources of carbon emissions include their paper use and the energy used for office spaces.
31. Paper bundles aside, there is room for law firms and in-house counsel to do their own sustainability audits on how they carry out their businesses and the carbon footprint generated. You could look more closely at the sustainability credentials of the firms your service providers, re-evaluate your own supply chains and vendors from a sustainability viewpoint and assess your firm’s total carbon footprint and environmental impact, even if indirect.
32. Climate change is the biggest crisis of the century. Addressing it will require the efforts of everyone. Everyone can contribute and make a difference. As you can see from my speech, there is much that lawyers can do. You are uniquely placed by virtue of your specific expertise and skillsets to help to put your clients and the world on a more sustainable path. So do go out there, and do good.
33. Thank you very much.