By Matthew McAdam (@mattmcadam), Director - Asia Pacific, Melbourne
Blink and you might have missed Asia’s scaling up of global sustainable finance over the past year.
Where once developments in Japan and China stole much of the limelight and the emphasis was on relatively niche green bond and loan offerings, regulation is now the common thread driving a race to the top when it comes to green and sustainable finance across what is a large, diverse and disparate region.
“There’s no doubt in my mind that the policy framework for green finance is set and that the challenges are clear and agreed,” said Ashley Alder, CEO of the Securities and Futures Commission and Chair of the Board, International Organisation of Securities Commissions (IOSCO), addressing nearly 1,000 delegates at the PRI’s APAC Digital Symposium last week.
"There's no doubt in my mind that the policy framework for green finance is set and that the challenges are clear and agreed," says Ashley Alder, Securities and Futures Commission, International Organisation of Securities Commissions, at the APAC Digital Symposium #PRI_APAC pic.twitter.com/7UzfsCDsDV— The PRI (@PRI_News) September 14, 2020
No longer in Europe’s shadows, Asia’s commitment to linking financial and sustainability policy has known few bounds in recent months. In the latest flurry of proclamations by the region’s central banks and regulators, you’ll hear a renewed sense of urgency when it comes to strengthening ESG disclosure and risk assessment frameworks for both investors and corporates, and adjusting levers where needed to channel capital towards more sustainable outcomes. That’s if of course you’ve been able to keep up with them all…
Mr Alder shared his views on the opportunities around green finance for Asia and the four elements of the policy framework he believes will be necessary to underpin this. Strategic, comparable, decision-useful, ESG disclosures by investors and companies on a global basis are the building blocks for everything else, he said, including addressing the scourge of greenwashing, developing and aligning taxonomies to drive capital allocation in support of the low-carbon transition, and strengthening scenario analysis for better climate risk assessment.
Regulators have redoubled their efforts in recent months and are determined to solve any issues that stand in their way to progressing sustainable finance
Ashley Alder, CEO of the Securities and Futures Commission and Chair of the Board, International Organisation of Securities Commissions
At the PRI, we couldn’t agree more. That’s why we continue to work with signatories across all of these areas; strengthening our signatory Reporting Framework and minimum standards of PRI membership; new work to drive meaningful data; and making TCFD-based disclosure mandatory for all investor signatories this year.
Mr Alder noted that regulators had redoubled their efforts in recent months and are determined to solve any challenges that stand in their way to progress.
Under the umbrella of ASEAN, financial regulators, central bank governors and policymakers are already working towards harmonisation, creating a level playing field within each country but also across the region. Hot on the heels of the adoption of the ASEAN Green, Social and Sustainability Bond Standards, the ASEAN Capital Markets Forum (ACMF) in March finalised a comprehensive roadmap for developing sustainable capital markets across member states, with a view to making capital markets a driving force for sustainable development.
Moving sustainable finance forwards
This will come as no surprise to many PRI signatories in Asia. When asked what the main drivers of sustainable finance policy development are in their country, 35% of symposium attendees cited the push for a low-carbon transition, followed closely by the investment opportunities presented by green finance.
At the PRI APAC Digital Symposium today, we’re discussing sustainable finance policy in the APAC region. What are the main drivers for sustainable finance policy development in your industry/region? #PRI_APAC— The PRI (@PRI_News) September 14, 2020
Stewardship codes have proliferated across both developed and emerging Asia and are now the rule rather than the exception, following the example of the UK to enter second iterations in several places. Tokutaro Nakai, Vice Minister, Ministry of the Environment, noted how a refreshed Japanese stewardship code in March, a reference point for the region, had clarified expectations of investors when it came to considering sustainability in their engagement with companies and service providers.
India is the latest country to strengthen requirements on investors with a new code to improve corporate governance and clarify institutional investors’ responsibility as owners. Crucially, the code is mandatory to ensure effective implementation. As Shri Amarjeet Singh, Executive Director, Securities and Exchange Board of India (SEBI), which administers the code told the audience, responsible investment is not optional anymore for Indian investors. Initiatives to develop a local taxonomy are also underway, supported by the Indian Ministry of Finance and the United Nations Development Programme.
Responsible investing is not optional anymore for Indian investors
Shri Amarjeet Singh, Executive Director, Securities and Exchange Board of India (SEBI)
Asset owners driving RI
Asset owners across Asia have also come into their own, setting out leadership positions and sending important signals of what’s expected of local companies and investors. While Japan’s GPIF is perhaps most often cited, the Hong Kong Monetary Authority, which became a PRI signatory earlier this year, and South Korea’s National Pension Service, have both announced new measures or action plans to build on their responsible investment credentials. South Korea, Singapore and Malaysia have also set out national sustainable finance roadmaps.
Thailand is a leading light for what’s possible in developing Asia’s responsible investment prowess. Building on the country’s existing strengths in corporate ESG disclosure, the Government Pension Fund of Thailand and the Thai Stock Exchange are leading local collaborations in the financial sector, the latter making no secret of its desire to drive what it calls “ESG diplomacy” across the region and help export sustainable finance practices and standards to Malaysia and Indonesia in particular.
It’s clear from these developments that Asia is emerging as a key player in responsible investment. Let’s keep the momentum going.
View all recordings from the event, including Mandarin and Japanese translations
This blog is written by PRI staff members and guest contributors. Our goal is to contribute to the broader debate around topical issues and to help showcase some of our research and other work that we undertake in support of our signatories.Please note that although you can expect to find some posts here that broadly accord with the PRI’s official views, the blog authors write in their individual capacity and there is no “house view”. Nor do the views and opinions expressed on this blog constitute financial or other professional advice.If you have any questions, please contact us at firstname.lastname@example.org.