As investors shift capital into sustainable assets and away from fossil fuels, increased regulation is helping improve standards, transparency and consistency. That is beneficial for investors, lenders and for society as a whole as it opens up pathways to more diverse sources of investment. All of this should also help to narrow the multi-trillion-dollar gap that meeting the SDGs requires, and should ensure that businesses are more aware of climate risks and better equipped to do their part in managing them. Not surprisingly, issues remain. Some sustainability projects don’t deliver the ESG benefits they espouse, and the sector will require more rules to address those shortcomings.
Sustainability investing would also benefit from rules that allow comparability across jurisdictions. A third issue – on the risk side – involves resolving the gap in the insurance markets and bank markets. Yet all of these issues are likely to eventually be resolved, or at the very least improved. In the next ANZ FIG Newsletter, we will focus on how the trend is influencing financial institutions’ practices, how they can anticipate the expectations of investors and regulators, and embed sustainability into the corporate strategy. We believe that financial institutions who understand this trend of ‘sustainability as strategy’ will be able to capitalise on opportunities to grow while becoming more resilient and enduring as an organisation.
2 Commission action plan on financing sustainable growth, European Commission (March 8, 2018). See: https://ec.europa.eu/info/publications/180308-action-plan-sustainable-growth_en
3 See: https://www.sustainablefinance.org.au/
4 Europe, the US, Japan, Canada, Australia and New Zealand.
5 2018 Global Sustainable Investment Review, GSIA (March 2018). See: http://www.gsi-alliance.org/wp-content/uploads/2019/06/GSIR_Review2018F.pdf
8 See: https://www.climatebonds.net/
10 ESG Integration in Asia-Pacific: Markets, Practices, and Data, CFA Institute and PRI (2019). See: https://www.unpri.org/download?ac=6459 and ESG Integration in Europe, The Middle East and Africa: Markets, Practices, and Data, CFA Institute and PRI (2019). See https://www.unpri.org/download?ac=6036