Financial institutions should ride the wave on the current sustainability hype, according to the Monetary Authority of Singapore, or losing the momentum needed to address climate change.
«Today, the topic of sustainability and climate actions are now on the scripts of governments officials and business leaders and the headlines of media,» said Kwok Quek Sin an MAS executive director during a recent webinar hosted by Nanyang Technological University. «Some may say that this is all only talk and only hype, more form than substance. I agree that this is mostly true.»
Nonetheless, Kwok admits that this hype is a prerequisite to kickstarting discussion and investments into the sustainable investing.
«Hype is a necessary step to gain awareness and mainstream interest and we must take advantage of it.»
More Action Required Now
Kwok named five key areas that the MAS was engaged in supporting green finance: environmental risk management; green financial solutions; green research and talent development; standardizing taxonomy; and funding of green fintech solutions and projects.
Also present in the webinar was J.P. Morgan whose senior country business manager for south and southeast Asia Wei Han Ong underlined three sectors the bank was focused on low carbon transitioning: oil & gas, electric power, auto manufacturing.
And Stacs co-founder Benjamin Soh highlighted technological efforts being specifically with regards to high quality, real-time data to enable and support investors, financial institutions and corporates.
Investor Preparation
Investors are already preparing for a range of outcomes regardless of when – and if – there is further progress on climate-related actions.
Singapore's sovereign wealth fund GIC, for example, takes a «scenario analysis approach» which projects various outcomes and subsequent market impact from three different hypothetical situations: orderly and early climate action; late and disruptive climate action; and little to no further climate action.
«Expected returns on asset classes are lower across the scenarios,» said GIC’s futures unit head Rachel Teo, adding that 60/40 portfolios could see 20-90 bps of annualized returns lost over a 40-year period. «Riskier assets like PE and listed equities are more affected by climate change. Bonds and cash are more resilient.»
