Green Finance Advisor of Friends of the Earth (HK) / 香港地球之友綠色金融顧問
The outbreak of COVID-19 is affecting
countries, big and small, around the world. Governments and organisations are
stepping up support for people and businesses. This gives rise to the
popularity of issuance of social bonds, which are used to finance projects that
having positive social influence. Paying for healthcare system, providing subsidies
for SME/employment and building affordable homes are project examples.
In March 2020, the International Capital
Markets Association (ICMA) highlighted the role of social bonds in helping the fight
of coronavirus pandemic. According to data shared by Morgan Stanley, about
US$32 billion of social bonds have been issued in April 2020 alone, exceeding the
issuance of green bonds for the first time. Some of the issuers include European
Investment Bank, Cassa depositi e prestiti and Bpifrance. Both social bonds and
green bonds are under the umbrella of sustainable bonds.
We recommend the HKSAR government to issue social
bonds in response to COVID-19. This will not only give more financial support
to the Hong Kong people but also help promote Hong Kong’s strengths and thought
leadership on green and sustainable finance regionally and globally. This is
among the things that the Green and Sustainable Finance Cross-Agency Steering
Group (established last month, initiated by HKMA and SFC) wants to achieve. Noticeably,
the HK Exchange recently announced the launch of Sustainable and Green Exchange
– STAGE. An online repository for sustainability, green and social bonds and
ESG-related Exchange Traded is expected to roll out later this year as part of
the initial phase of STAGE. COVID-19 social bonds could be put into this repository.
Michele Leung, Green Finance Advisor of Friends of the Earth (HK)
Global Sustainable Investment Review, USD $32 trillion of assets are
professionally managed under sustainable responsible investment strategies in
It represented a compounding annual growth rate of 43% over the past 12 years. As
more institutional investors are integrating ESG into their portfolios, studies
have been done on the leading factors for such trend.
regulation is one of the main drivers. For example, EU has introduced the “EU
Climate Transition Benchmark” and “EU Paris-Aligned Benchmark”, which aimed at
reallocating capital towards a low-carbon and climate resilient economy.
Domestically, we are also seeing stricter disclosure requirement enforced by
various exchanges. Fiduciary duty is a primary driver for asset owners,
particularly for the pension funds and endowments that have to respond to their
stakeholders. Risk management is also an important aspect as ESG is considered
to have some downside protection nature, from mitigating ESG risk to avoiding
Surprisingly, generating outperformance doesn’t yet to be considered as a key factor for ESG adoption. Despite the ongoing skeptics, more researches have been done to establish the financial relevancy. For example, in one industry study (link), it looked at the correlation between ESG and market performance, which found ESG integration generally demonstrated historically higher active return profiles in Emerging Market and Asian equities.
ESG funds are also
gaining traction under current situation. As of Jun 1, 2020, iShares ESG MSCI
USA Leaders (SUSL) outperformed S&P 500 year-to-date by 176 bps, the
underlying benchmark was based on best-in-class approach which targets the
companies that have the highest ESG rated performance in each sector of the
parent index. In the meanwhile, COVID-19 has underscored the importance of ESG
issues to company resilience and long-term performance. Social and Governance
issues are at the forefront with spotlights on labor practices, employee health
and safety and supply chain management.
Overall, it is encouraging to see ESG integration is on the rise with more investors bringing ESG into their investment decisions and achieve sustainable value creation.
The Standards are being designed to help investors ensure their processes are in line with best practice impact measurement and management, and to demonstrate an investor’s contribution to the SDGs. The Standards also serve to operationalize important existing Principles to drive more consistent implementation and provide credibility for the market, reducing the risk of impact or SDG washing.
Over the next 90 days, the International Integrated Reporting Council (IIRC) calls for your feedback on a new Consultation Draft, proposing revisions to the International <IR> Framework.
The IIRC calls on stakeholders globally to share their thoughts on the Consultation Draft to ensure the <IR> Framework responds to the evolving market context and supports robust, effective reporting. Feedback is requested through an online survey and via participation in one of over 20 virtual roundtables hosted by the IIRC’s partners globally.
The Consultation Draft has been informed by the 300 responses the IIRC received on three topic papers published in February this year, ongoing observation of market practice internationally, as well as the detailed deliberations of the IIRC’s <IR> Framework Panel, a diverse group of reporting experts from the business, investor and accountancy communities. A companion document that sets out the basis for the proposed <IR> Framework revisions is also available.
As part of the main session of the UN Virtual Forum on Responsible Business and Human Rights – Asia Pacific (9-12 June), UNEP FI is co-organising a session on the role of the finance sector in the sustainable and inclusive recovery from the COVID-19 crisis in the ASEAN region, with speakers from CIMB Group, Malaysia, WWF Singapore, UN Environment Programme and Government Pension Fund, Thailand.
This session will discuss the role of the finance sector in driving more responsible business practices and investments, in support of a more sustainable recovery. It will hear what banks and responsible investors, including institutional investors are doing in that regard, and discuss how government can help drive the change towards more integration of ESG criteria in investment and financing decisions, to push more ambitious action of companies, including as regards climate change.
In this virtual fireside chat, Impact Entrepreneur’s Laurie Lane-Zucker and Asia Value Advisors’ Philo Alto will discuss with our distinguished group of panellists — Leonie Kelly of Sustainable Finance Initiative, En Lee of LGT, Ronie Mak of RS Group, and James of PRI — the trends and developments in growing sustainable finance in Asia in the new post-pandemic normal.
The conversation will tackle topics such as:
– Trends and developments in sustainable finance in Asia in the private, institutional and development sectors in the current transition phase to a new post-pandemic normal – Political and economic headwinds in the post-pandemic normal and how sustainable finance is (or is not) staying the course in Asia – Playing the long-game — building a cross-sector talent pipeline in sustainable finance – Practical considerations — state of impact measurement and management; challenges and gaps in the sustainable finance ecosystem in Asia; and, how US, Europe and Asia regions can learn from and support each other – Turning crisis into opportunities for the future — role of policy and ecosystem capacity building; advice on how one’s own professional journey can support sustainable finance and contribute to systems change in the new normal.
The COVID-19 crisis is likely to have dramatic consequences for progress on climate change. Imminent fiscal recovery packages could entrench or partly displace the current fossil-fuel-intensive economic system.
Here, we survey 231 central bank officials, finance ministry officials, and other economic experts from G20 countries on the relative performance of 25 major fiscal recovery archetypes across four dimensions: speed of implementation, economic multiplier, climate impact potential, and overall desirability.
We identify five policies with high potential on both economic multiplier and climate impact metrics: clean physical infrastructure, building efficiency retrofits, investment in education and training, natural capital investment, and clean R&D. In lower- and middle-income countries (LMICs) rural support spending is of particular value while clean R&D is less important.
These recommendations are contextualised through analysis of the short-run impacts of COVID-19 on greenhouse gas curtailment and plausible medium-run shifts in the habits and behaviours of humans and institutions.
This report summarises the results of the second phase of a PRI-led engagement on labour practices in agricultural supply chains. A first phase of the engagement, during 201316, sought to understand labour rights challenges and risks in supply chains. This second phase, which ran from 201719, involved deeper engagement between 29 PRI signatory investors and 33 companies in the Beverages, Food & Drug Retail, Food Producers and General Retailers sectors. Its objective was to identify and assess existing corporate practices, encourage enhanced communication and reporting, and support improvement of performance and impact by target companies.
The engagement involved an assessment of companies across six areas: supplier codes of conduct; governance and accountability; traceability and risk assessment; sourcing and supplier relationships; collaboration on systemic issues; and monitoring and corrective action.
3. New Reports: ESG Implications of Coronavirus Published by: Fitch Ratings
Fitch Ratings has published a trio of reports on the ESG implications of Coronavirus. The reports are free to download through the links below:
The People’s Bank of China plans to remove “clean fossil fuels” from the list of The Green Bond-supported Project Catalogue, according to the draft published by the Chinese regulators last week.
Unifying the policy within the country’s various regulators is a “hugely significant step that will be welcomed by international investors,” said Sean Kidney, chief executive officer of Climate Bonds Initiative. The removal of fossil fuels brings China into closer alignment with international practices, he said.
The inclusion of “clean coal” in 2015 list had put China at odds with global standards. Chinese green bond issuances that met international standards raised US$31.3 billion in 2019. Yet also in 2019, Chinese green bond issuances that did not meet such standards raised US$24.2 billion.
This new revision is likely welcomed by the international investors. The consultation process on the Green Project Catalogue is open to public comments until 12 June, with the final announcement of the Green Project Catalogue set to be made later in 2020.
What would be removed from the previous catalog:
Large ultra-supercritical or supercritical coal-fired power plants, which were previously included as energy-saving projects.
Projects that process coal to remove impurities.
Ventures that produce fuels and fuel additives including gasoline and diesel with higher environmental standards.
What will be added to the new catalog:
More clean energy projects, including hydrogen, geothermal, tidal power, biomass, energy storage, and carbon capture and sequestration.
A new category of “green services” which includes trading carbon emission credits and renewable energy certificates, as well as demand-side management in the power market and designing green industrial projects.
Infrastructure supporting new energy vehicles including distributed charging points and hydrogen charging stations.
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