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Momentum in sustainable finance in Asia

Momentum in sustainable finance in Asia

Growing the market for sustainable investment

by OMFIF Analysis

Tue 31 Jul 2018

The Bank for International Settlements, OMFIF and Amundi convened a meeting on 17 July in Singapore on how official institutions can help combat climate change.

Opening remarks were delivered by Luiz Awazu Pereira da Silva, deputy general manager of the Bank for International Settlements. He spoke about the importance of maintaining networks between central banks, along with the history of sustainable finance in central banking.

In a keynote speech, Jacqueline Loh, deputy managing director of the Monetary Authority of Singapore, explained that water sustainability is key to long-term planning in Singapore. She said there was increasing momentum in the area of sustainable finance in Asia but more needs to be done in gaining international support for existing national standards.

Frédéric Samama, deputy global head of institutional and sovereign clients at Amundi, spoke about the need for risk-sharing to get the private sector invested in green infrastructure. He talked on International Financial Corporation's green bond structure, which Amundi plays an integral role in.

Yeo Lian Sim, special adviser at the Singapore Exchange, and vice-chairman of the Task Force on Climate Related Financial Disclosures, spoke more generally about Singapore's importance as an asset management hub, and its move towards green finance.

Mototsugu Matsuoka, chief executive officer of the Development Bank of Japan in Singapore spoke on Japan's vulnerability to natural disasters and how such risks are taken into account in credit analysis. The Asia-Pacific region is five times more likely to be hit by natural disasters than anywhere else and they are becoming far more frequent and intense. However, credit risks in 'green projects' are more serious than expected. Renewable energy is a newer industrial sector so there are issues in initial project management, and institutions may struggle to cope with sudden policy-changes. Banks must look carefully to mitigate such risks.

During a working lunch, John Hewson, chairman of the Asset Owners Disclosure Project, warned there is still ignorance and misunderstanding from institutional investors over the dangers of climate risk, and financial markets continue to put up enormous resistance to managing climate risk.

Nehal Vora, chief regulatory officer at Bombay Stock Exchange, told the seminar that sustainable investment in Asia is anticipated to grow to over $2tn by 2020. He said regulators and stock exchanges bind multiple stakeholders of capital markets at a regulatory level, and can help address challenges that are beyond the ability or responsibility of a single company.

According to Rahajeng Pratiwi, officer for environment and social risk at the  International Financial Corporation, emerging markets have now become a major force in driving development and fighting climate change as 34 countries have initiated banking reforms to expand sustainable lending.

In this context, Esala Masitabua, deputy governor of the Reserve Bank of Fiji, spoke about his country's green bond issuance in 2017, the first of its kind from a developing nation. He emphasised all sectors and all nations need to share the burden of sustainable finance.

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