SINGAPORE (Nov 11): It has been four years since the United Nations (UN) Sustainable Development Goals (SDGs) were established as the blueprint for achieving a better and more sustainable future for the world, encompassing 17 goals on addressing poverty, inequality, climate, environmental degradation, prosperity, and peace and justice.
Yet, as it stands today, no country is on track to achieving them by the 2030 deadline.
When Julia Walker, head of market development for Asia-Pacific at data analytics firm Refinitiv, attended the UN General Assembly and Climate Week NYC last month, there was definitely a sense of urgency in the air, and it bordered on panic, she says.
“If we don’t achieve [the SDGs], we leave millions to die, because it’s serious. We need to go into the great acceleration, and that means the private sector has to step up,” she tells The Edge Singapore.
Walker, co-author of the book Sustainable Development Goals: Harnessing Business to Achieve the SDGs through Finance, Technology and Law Reform, is not one to mince words. She is quite clear that, for the SDGs to succeed, a step change is needed. Information gleaned from Refinitiv’s vast data pool shows that companies are not stepping up enough, the world no longer has the luxury of time, and nowhere in the world is this agenda for change more urgent than in Asia.
The world’s fastest-growing region, Asia is becoming its greatest polluter as well in its pursuit of growth. In fact, in the coming decade, the region will be the growth engine of the world, with two-thirds of the global middle-class living in Asia by 2030.
Drawing on Refinitiv’s Environment, Social and Governance (ESG) database, which covers 70% of global market cap, a report released by the firm called “Financing a Sustainable Future in Asia” looks at the performance of the largest companies across Asia and clearly demonstrates the link between sustainability and financing.
“We can’t achieve it [the SDGs] without the private sector. We need companies and businesses to do their part. And it comes down to: How do we do it? Financing. Money is the key,” says Walker.
The growth of sustainable financing has been incredible, with more than US$86.3 trillion ($118.4 trillion) in investable assets committed to the Principles of Responsible Investing, says Walker. “We need US$7 trillion a year to achieve the SDGs. So, if there’s US$86.3 trillion in assets, there’s enough money. It just needs to be channelled in the right direction.” Already, there is substantial growth in the issuance of green bonds. In Asia-Pacific and Japan, a record high of US$21.9 billion was raised in green bonds, up 29.6% from a year ago. According to the report, Southeast Asia also gained momentum, with US$3.3 billion worth of proceeds in 1H2019, up 36.1% y-o-y.
Looking beneath the surface of sustainable finance
Yet, increasingly, it is not enough to look at the financials alone. “Sustainable financing means bringing in factors other than financial, [such as] environmental, social and governance,” says Walker. “From what we’ve seen in the past, a lot of the time, there’s been corporate governance issues, and we’re getting through them now. So, people now know that you can’t just look at financials; you really need to look at what’s under the bonnet.”
Indeed, a closer look at many of Asia’s largest companies shows that it is what lies under the surface that tells the greater story. The Refinitiv report found that, for many of Asia’s largest companies, there is still a gap between intention and action, with many companies implementing policy change without establishing targets.
For example, it found that nearly two-thirds (63%) of global companies have a policy to reduce emissions, up from 56% five years ago, but only one-third (35%) have specific reduction targets for emissions, meaning many are setting policies without backing up their intentions.
“This is a big call-out to companies. It is one thing to have a policy, but you really need to have a target. What our data is showing is that, the companies that had targets are actually reducing their emissions, but the ones that don’t have targets have been actually increasing emissions,” she says.
The companies in Asia that set carbon dioxide emission targets in 2013 achieved an 8% reduction in their collective emissions over a five-year period, from 1.503 billion tonnes to 1.385 billion tonnes annually. Those that did not have targets, however, reported a 226% increase in CO2 emissions over the same period — from 834 million tonnes to 1.88 billion tonnes.
“So, it goes back to the old saying that what gets measured, gets managed,” says Walker.
It is also not enough that funding is channelled in the right direction, but there is a crucial need to actively prevent it from being siphoned out in the wrong direction.
“So, [on the one hand,] we have an opportunity to fund sustainable finance. But, if we’re siphoning it out through money laundering or illicit trade, we have another thing,” she says. “There’s enough money to be invested in the right way in Asia, but we need to stop it from leaking out and plug the leaky bucket.”
To this end, the rise of digital financing and fintech has been instrumental in plugging the illicit flows of funds, and Walker says this is the key to transforming sustainable financing.
No time to lose
Still, Walker agrees that the time for “awareness” is over. “We don’t have enough time to waste. We need to move into mitigation and adaption,” she says. “We’re past the point that we can be light-handed and just coax people along.”
Hearteningly, there is a lot of movement in this regard. “Many central banks have formed committees and committed to the greening of the financial system, and are now very much looking at their role in the green economy,” she adds. “The UK, for example, is actually stepping forward; Singapore is very much on the front foot of fintech and innovation.”
Walker says the question of our generation is: What is the price of our planet? “At the end of the day, it’s very simple economics. When you put a price on it, it’s going to cost more. Things will cost more when you price in the externalities, and we’ve been polluting for free for a long time.”