Singapore must embrace global ESG movements to stay competitive: SGX sustainability head

TO remain competitive as an Asian financial hub, Singapore companies must ride a "seismic shift" in capital and embrace the systemic push towards environmental, social and governance (ESG) investments, said Herry Cho, managing director and head of sustainability and sustainable finance at the Singapore Exchange (SGX).

Noting an inflow of funds into ESG globally, Ms Cho said the effect will trickle down into Asia.

"Singapore is a hub for the region for capital raising and trading across different asset classes, not only equity," she said. "To continue competing, we have to embrace the global movements. And so, then, the key question is: how can we capture the capital that's going to channel towards emerging markets?"

Ms Cho's comments came at the launch of Manulife US Reit's week-long thought leadership initiative on Tuesday to engage the investment community on ESG.

The Monetary Authority of Singapore (MAS) expects all financial institutions to make climate-related disclosures from June 2022.

Singapore Exchange Regulation (SGX RegCo) in August also proposed that all listed companies be required to make mandatory climate-related disclosures based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

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"The TCFD recommendations are a framework for us to understand climate change and its effects on the company, and the company's effects on climate change," said TCFD vice chair Yeo Lian Sim.

Ms Yeo, SGX's former chief regulatory and risk officer, pointed out that the language used in four pillars of the recommendations is "business speak".

"These are very familiar terms and concepts … because this framework is for businesses," she said.

Already, institutional investors have been paying much attention to companies' ESG efforts. While the main focus for some has been on corporate governance, investors say the environmental and social portions are starting to shine through.

When there's a corporate governance misstep, markets are very quick to price that in almost immediately," said An Chen, assistant portfolio manager at real estate fund manager AEW Asia. She added that while companies that don't do well on the environmental and social aspects do get penalised, these issues often take more time to surface.

"As an investor of physical real estate or companies that invest and own real estate, thinking about the physical risks of climate change, whether it's flooding or wildfires, is more critical than ever," Ms Chen said.

"As these events start to happen more frequently, in multiple locations, and the extent of the damage or downtime increases, we as investors and companies really need to think about pricing in the risk of physical climate change," she added.

Jill Smith, CEO of the manager of Manulife US Reit, said it is imperative for real estate investment trusts (Reits) to up their ESG game.

"It's a shocking fact that some 40 per cent of global emissions are from buildings - not cows, agriculture, or transport," she said.

Manulife US Reit targets to achieve a 100 per cent green-certified portfolio by 2030, up from about 90 per cent currently, and to maintain its 5 Star rating for its GRESB Real Estate assessment going forward.