By: Clara Chua, DigitalCFO Asia | 3 December 2021
With all eyes on environmental, social and governance (ESG) issues, firms are beginning to move beyond the current view and strategically respond to leverage on innovative technology and seek new partnerships. The key opportunity is in preparing and accelerating the transition to an ecosystem focused on satisfying fundamental human needs and wants while addressing societal changes.
This revolution may be observed as a new threat. Still, it does offer vast opportunities for financial management to play an impactful and profitable role. Research has indicated that bringing a sustainability lens to business strategy can identify risk management, avoid unethical behaviour and enhance returns – all of which contributes to a competitive advantage.
Effect on Banking and Finance Industries
Taking transitional risk into consideration, the future growth of banking will be widely determined by their ability to anticipate and navigate into a low-carbon and clean-technology economy. However, bank executives are also aware of the need to balance their duty to finance the ESG transition against their commitment to shareholders.
The number of ESG-related announcements released by banks before COVID-19 were staggering. Showing great initiative on paving the way towards a greener finance. Goldman Sachs has reported an investment of US$750 billion on sustainable finance over the next decade.
Along with financial contributions from large global banks, the Network for Greening the Financial Systems (NGFS) was also created to share best practices around fundamental challenges. Between a group of central banks and supervisors, the knowledge ranges from integrating climate-related risks to financial stability monitoring.
Effect on Food and Beverage (F&B) Industry
It is no wonder that more companies are beginning to face increasing pressure from consumers with the massive raw materials consumption and huge waste in the F&B industry. Even within the same industry, different companies take on diverse ESG profiles depending on their corporate life cycle.
For instance, the multinational F&B company Nestlé has pledged US$1.3 billion to support and further the implementation of a regenerative food system across its global supply chain. Many other companies have also shown increased adoption of both internal measure and external regulations, appointing a Chief Sustainability Officer to issue ESG statements regularly.
Trends and Outlook for 2022
Moving forward most public listed companies have already published ESG reports and shared data on how environmentally conscious they are. On top of that, new financial reporting standards by The Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) are paving the way where ESG statistics will carry the same importance as a company’s declared financials.
There is a current leverage for financial officers to know the details and operational measurements to provide transparent and accurate backing to their ESG reports. For instance, the finance department is to account for the level of greenhouse gas contributed by an individual compressor in the last month.
Since the announcement of Project Greenprint in December 2020, the Monetary Authority of Singapore (MAS) has also partnered the financial industry and other sectors to address challenges faced in accessing high quality and consistent sustainability data.
Four main utility platforms have been expected to be completed by the third quarter of 2022. Greenprint Common Disclosure Portal, a key internal ESG monitoring and management tool. Greenprint Data Orchestrator, sustainability data from multiple data sources are collected and enable insights to better support investment and financing decisions. Greenprint ESG Registry, record and maintain ESG certifications verified by qualified third party auditors. Greenprint Marketplace, connects green technology providers in Singapore and to a community of investors and corporates to facilitate partnership, innovation and investments.