Sustainable Finance – From alternative to mainstream

24 Jul 2019

From talk to action ; from sideline to mainstage

The first half of 2019 has been “eventful” in the literal sense of the word. In my new role as Co-Founder of GoImpact, our platform has been fortunate to engage with forerunners in the sustainable development space, being Knowledge Partner with Financial Times in the “Investing for Good Asia” Forum in April; acting as one of the Judges for the Liveability Challenge organized by Temasek Foundation with whom we are a Strategic Partner; and joining forces with many financial institutions and large corporations as the market traction for Sustainable Finance is fast escalating.

However, is this a false dawn or a true momentum?  Are we, as a group of dedicated practitioners and advocates, able to move beyond the talk (which there is no lack of …) to real action?  And mobilize this critical agenda from the sidelines to mainstage?

The rhetoric is louder than ever ….. The gaps and hurdles are still plentiful …..

Three main gaps to plug – Understanding, Data, Collaboration

Of the myriad of issues hampering the development of Sustainable Finance, there are three major gaps that we need to plug, in order to scale up and speed up.  

Understanding Gap

  • A tendency to “preach to the converted”, in a language filled with coined acronyms and academic debates that contributes to walling in Sustainable Finance as alternative rather than mainstream.
  • Metrics are developed by various practitioners but the perceived challenges of having common benchmarks for investors to relate to are often magnified to the point that it becomes a “show stopper”.

Data Gap

  • Data are fragmented and hence, not readily accessible in a relevant and orderly manner as investors (particularly institutional investors and ulta high net worth private capital owners) rightly expect, and much needed to drive scalable actions.

Collaboration Gap

  • Rapid market traction of this agenda often stays at the superficial, theatrics and publicity level.  We are seeing recently, market and regulatory demands that drive this to a more substantial level though.
  • To accelerate and scale sustainable investments, we need enablers and platforms that connect the disjointed stakeholder groups, simplify and clarify the investment universe, and advocate in a practical action-driven manner, rather than annual gatherings of the “converted” preaching the same mantra and lamenting the same problems to a similar audience that become sponsorship revenues for the organizers but does not truly “move the needle”.

Here is a short video clip from the opening panel at Financial Times “Investing for Good” Asia Forum, where I highlighted these gaps to a highly engaged audience of investors and finance industry professionals

Capital is moving towards sustainable investments – Is it fast enough? Ready enough for investors at large?

While the data captured in the latest Sustainability Trends Report (extracted infographics below) from Generation Investments point to an encouraging upward trend for sustainable investments, to mobilize private capital en masse, we are still lacking the readiness of information and knowledge access, and effective framework around which ESG (Environment, Social, Governance) metrics can be integrated into investors’ portfolio management.

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In the past few years, ESG focus in Asia has received a huge boost on the back of government and regulators initiatives. Mandatory ESG disclosure and clearer guidelines for ESG reporting are all working to improve corporate transparency. Stock exchanges in a number of countries including Hong Kong, Thailand have made it compulsory for listed companies to disclose their sustainability information. China is following suit, with all listed companies there having to report on ESG risks and related disclosures by 2020. Such top-down focus is expected to further drive improved corporate governance that will positively influence sustainable investment opportunities.

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With the exponential growth of technologies and their adoption by capital markets, such as Blockchain and Artificial Intelligence, we are in a much better position than ever before to scale up sustainable investments. Indeed, “capital for good” and “tech for good” are the twin engines to achieve the 2030 Plan for Sustainable Development Goals (SDGs), the excellent backdrop that United Nations have provided as a blue print for a better livelihood and better Planet.

Just as the distinction between online and bricks-and-mortar retail will increasingly blur in the next decade, so will the distinction between impact and mainstream investing. 

Surely, the ultimate goal for sustainable investment is to make this term redundant – a time when every investment is a sustainable impact investment.