THE Asia Sustainable Finance Initiative (ASFI) plans to target retail investors after its online sustainable finance courses for professionals have already attracted about 5,000 participants in the first year, according to ASFI owner the World Wide Fund for Nature (WWF) Singapore.
The professional courses were first launched in September 2021 as part of a collaboration with major Singapore financial sector organisations comprising the Association of Banks in Singapore (ABS), the Institute of Banking and Finance Singapore (IBF), the Investment Management Association of Singapore (IMAS), the Life Insurance Association Singapore (LIA), and Singapore Exchange (SGX). Looking forward, ASFI wants to educate the general public on how to invest responsibly, WWF-Singapore chief executive R Raghunathan told The Business Times (BT) on Monday (Oct 10).
"We focus not only on the supply side, but also on the demand side. Both sides, we want to make sure, are educated and informed and taking the right steps to make sustainable finance the norm of the future. The mainstream financing has to be sustainable," Raghunathan said.
Based on a survey, WWF-Singapore found that the Singaporean public are generally not too aware of sustainable personal finances and how their retail investments can have an impact on the environment and nature, said Kristina Anguelova, the non-profit's head of sustainable finance for Asia.
Both were speaking to BT ahead of WWF-Singapore unveiling its plans and focus areas for 2023, which include climate, sustainability and the circular economy as well as nature and biodiversity.
The mainstreaming of sustainable finance would involve having in place risk identification mechanisms for programmes and projects, the monitoring and reporting of environmental, social and governance (ESG) indicators, as well as guidelines and frameworks on green programmes, said Raghunathan.
"All these criteria and frameworks need to be in place, so that money can then smoothly flow into where it's got to go... So what governments can do is to have a system that allows money to be channelled in a very streamlined fashion towards where it is required...
"In the absence of a streamlined mechanism, money will flow in fits and starts," he added.
Management consulting firm McKinsey has estimated that US$9.2 trillion of investments are required annually until 2050 for international climate goals to be achieved, but Raghunathan pointed out that currently only about US$200 billion is being channelled into such causes.
The main reason why capital is not flowing to these climate projects is because investors have concerns on their quality and whether these will generate a return.
"There are genuine concerns that investors might have, and they may be biding for an opportune time when their payoff is even better, before they allow the release of their funds. So it's always a question of risk-reward payoff," he said.
The ability to scale these projects or programmes are also important to attract investors to participate, said Anguelova.
One example of a scalable programme would be to help small and medium-sized enterprises(SMEs) in Singapore transition to a lower-carbon business model, said Raghunathan.
"It should not be that there was money enough for five companies to benefit, but the sixth, seventh, eight and ninth and 10th ran out of money, and so the transition could not take place," he added.
The vast majority Singapore's industrial base are made up of SMEs and WWF-Singapore has a programme where they work with these companies on their transition plans. This involves developing a good assessment and mitigation mechanism for SMEs to, first, be aware of their carbon footprint, before taking concrete steps to try and reduce it.
He noted that some challenges SMEs face are the lack of knowledge and resources, as well as a fear that a change to their business model would mean that their lifeline is uncertain.
While central banks and financial sector players can come up with mechanisms to ensure there is capital ready to flow into these projects, the bigger problem is getting more of such projects in the pipeline, including sustainable infrastructure projects, noted Raghunathan.
For that to happen, he believes that there needs to be more capacity building where ESG considerations become integral to the design of these projects.
Looking ahead to the 2022 United Nations Climate Change Conference set to take place in Egypt in November, Raghunathan said he hopes the focus will move beyond talk to implementation.
"Countries have to go beyond their 2030 pledges that they made in their nationally determined contributions if they were to have any chance of keeping to 1.5 deg Celsius global warming by 2050."