BritCham-ICAEW Report: Greater private-public partnerships and supportive policy frameworks key to unlock green finance opportunities in ASEAN

DigitalCFO Newsroom | 18 November 2021

  • Sustainable trade financing along the value chain could bring about US$26 billion opportunity to the region over the next decade
  • Key challenges include ongoing talent crunch, discrepancies in climate finance standards and the need for standardised audit standards
  • Professional bodies play a key role in the support of effective policy and standards, cross-region collaboration and upskilling of talent

A report produced by international chartered accountancy body, the Institute of Chartered Accountants in England and Wales (ICAEW) and the British Chamber of Commerce Singapore (BritCham) reveals the perspectives of finance professionals in relation to climate finance and wider sustainability goals, with focus on the Association of Southeast Asian Nations (ASEAN) region.

The findings of the report were presented based on interviews with professionals across a range of related disciplines across ASEAN and UK conducted between September and October 2021. The report highlights the role that finance professionals plays in addressing the risks associated with climate change, the most important barriers to effective climate finance and the need for urgent, scaled-up climate finance action.

Pressing challenges to the growth of sustainable finance in ASEAN

While climate change presents a huge global threat, ASEAN countries face specific and disproportionate challenging issues, with forecasts showing six of the twenty countries being most vulnerable to climate change worldwide being Indonesia, Thailand, Myanmar, Malaysia, Vietnam and the Philippines.

Geographical and demographic factors such as dependence on the agriculture sector and natural resources have increased the need for ASEAN countries to scale-up climate resilience investment or risk facing a climate change risk premium which would undermine wider development efforts.

However, seizing the window of opportunity and integrating sustainable trade financing along the value chain could bring about US$26 billion opportunity to the region over the next decade.

Addressing ASEAN’s talent crunch

The growing need to nurture talent in the ASEAN region has become apparent. According to experts interviewed, there is a serious shortage of individuals with the essential skills to support the growth of finance climate activity at both strategic and operational levels.

This includes sustainability experts with the necessary deep sustainability knowledge and experience and current finance and associated professionals, including accountants, who can apply existing financial expertise in a sustainability-informed way.

Although progress has been made, the sector needs talent who are not only able to analyse granular climate-related data but provide recommendations that can reach into the core functions of businesses to bring about change. 

The report noted the potential role of university-based research in supporting corporate sustainability efforts, such as the Sustainable and Green Finance Institute, a new research institute in green finance and sustainability by the National University of Singapore. Some interviewees also proposed that universities work with finance organisations and trade associations to leverage existing programmes. Nonetheless, the experts cautioned that given the rapid pace of change in this area, courses will need more regular updating than has been the norm for many academic approaches.

Building new benchmarks of success

Across the series of interviews, the need for standards was a clear theme. As trends like green washing continue to plague markets, the public and private sector will have to work together to create consistent taxonomy to help purchasers and developers of financial services navigate through a new Green Finance future.

Drawing parallels to the role of a conductor in an orchestra, experts cited how the Task Force on Climate-Related Financial Disclosures (TCFD) is a strategic initiative that unites the region on guidelines to follow, from risk and opportunity and leading to innovation.

Amid a new business landscape, greater clarity and standards around audit and disclosure will be pertinent. Accounting bodies will continue to play a key role in building public trust by ensuring that reliable, standardised data is used to support effective levels of assurance on disclosure.

Mark Billington, ICAEW Managing Director, International, said “The Covid-19 pandemic has presented organisations with a real opportunity to build back a world of stronger and more sustainable economies. We are now at a turning point for positive change – to bring greater urgency to the issue of sustainability at hand.”

“Individuals, governments, and businesses are all in this together. Professional bodies such as ICAEW can play a key role in the future development of climate finance, not only in developing the skillsets required of our members but also through our support for effective policy and standards as well as promotion of research and cross-sector and cross-region collaboration.”

David Kelly, Executive Director of the British Chamber of Commerce Singapore, said ““The development of the green finance sector represents a significant opportunity for both the UK and ASEAN. The findings from our expert interviews, conducted across the region and in the UK, illustrate the depth of knowledge within the British Chamber network and the importance of professional bodies such as the ICAEW in developing this area.”

Other key findings from the report:

  • Singapore and Malaysia to lead Green Finance efforts 

Sentiments from our interviews echoed those revealed in the September 2021 edition of the Global Financial Centres Index (GFCI 30) which ranked Singapore as 4th out of 116 financial centres around the world due to its strong business environment, human capital and infrastructure, amongst others.

The interviewees also acknowledged the growth of Singapore into a global finance hub, in a region experiencing significant economic growth and offering a wide range of financial services, offers a template on how public and private sector initiatives can work together to deliver change and develop a hub.

Many interviewees highlighted co-ordinated action across society as an important channel of change, giving praise to the Singapore Green plan led by the Monetary Authority of Singapore (MAS) and recent announcements of green bond projects, pricing act and regulations in Singapore’s 2021 Budget.

Malaysia was also acknowledged as a pioneer in Islamic finance, a US2 trillion market opportunity, with its development of Shariah compliant green susuk offerings.

  • Moving beyond green and climate

Several of the report’s interviewees commented on the range of terminology being used in the sustainable finance arena. In some cases, this represents an increase in scope, for example the extension of existing green schemes to cover wider social aspects and become sustainability oriented.

The increasing generic use of ESG (Environmental, Social and Governance) was seen as a reflection of progress in approaches traditionally used in investment management. Nevertheless, the focus on attention was felt to rest squarely on climate issues. There was, however, the view that there was a lack of attention on other regionally important issues such as biodiversity and water scarcity, even though they are connected to climate change.