Key aspects of sustainable, impact-first finance

Melissa Teo, DigitalCFO Asia | 11 May 2022

In the financial services, sustainable investments are conscious of adhering to the environmental, social, governance (ESG) criteria

Sustainability refers to addressing current demands without jeopardizing future generations’ capacity to meet their own needs. In the context of financial services, sustainable investments are conscious of adhering to the environmental, social, governance (ESG) criteria. The 3 pillars of ESG are explored below:


Environment

There was once printed and mailed card statements, then banks switched to digital statements (often times without an option for clients to opt out). There’s also a line in emails cautioning you to save the earth, think twice before clicking printing. Such are examples of corporations reducing end-user carbon footprint. Bio-degradable, anti-waste packaging are also attempts to reduce carbon emissions.

Social

Financial corporations’ social responsibility applies to 3 groups of beneficiaries. Firstly, employees ought to be presented with a revamped compensation package comprising improved maternity and family benefits, more flexible work scheduling, and chances for learning and development.

Secondly, corporations will do well to stay in sync with ethically minded consumers by being transparent about their supply chain processes. Child labor, fair pay, safe work environments, diversity and equality to all employees are factors ethical consumers will call companies out on. Launching inclusive products with thoughtful designs for minority consumer groups such as left handers, petite and plus sized individuals.

Thirdly, to the global society at large, corporations can conduct fundraising, sponsorship, scholarships, and invest in community initiatives.

Governance

Green investors look out for companies whose accounting systems are accurate and transparent, and stockholders have the right to vote on significant issues. Companies with diverse board members, and non-engagement in illegal practices and currying of favours are also ideal characteristics investors price on.

What’s In For Green Finance

Positions with the label ‘sustainability’ and ‘green’ are abuzz in the recruitment sector. The talent pool of professionals with proven experience in all things green, is however thin. Companies are willing to shell out big bucks to attract these few talents to give their organisation an edge over the rest. According to a Weinreb Group survey, the number of chief sustainability officers (CSOs) among the major firms in the United States has increased by more than 228 percent, from 29 in 2011 to 95 in 2021. Green career paths include corporate sustainability, responsible investing, consultants for social impact projects.

Singapore’s Green Plan 2030

Turning the lens homeward, Singapore has identified 4 key targets on her national agenda of developing a green economy :

1. Implement an Enterprise Sustainability Program to assist firms, particularly SMEs, in embracing sustainability and developing competencies in this area.

2. Create business and job possibilities in green finance, sustainability consulting, verification, credit trading, and risk management.

3. Be a regional and worldwide leader in Green Finance by strengthening the financial sector’s resilience to environmental hazards, producing green financial solutions, expanding knowledge and capacities, and utilizing innovation and technology.

4. Promote local innovation and invite enterprises to anchor their R&D efforts in Singapore to create innovative sustainability solutions.

Green Washing? Just Lip Service?

The jury is still out as to whether financial service providers are truly embracing sustainability or just doing lip service. The observation of organisations green washing themselves has been increasingly rampant. Green washing points to a practice in which a corporation or organization spends more time (and money) promoting itself as environmentally friendly than it does limiting the environmental effect of its activities. Common instances include baseless claims of products as environmentally-friendly or claiming it so based on a narrow set of attributes, without paying attention to other environmentally detrimental factors.

Far from being a mere passing fashion fad, concrete and sustained ventures into green finance will greatly benefit our subsequent generations.


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