Asia Sustainable Finance Events, Webinars & Reports: June 2020

Idea Exchange – James Robertson

Consultation: Practice Assurance Standards for SDG Bonds
Organised by: UNDP

UNDP SDG Impact is pleased to share the first consultation draft of Practice Assurance Standards for SDG Bonds (the Standards) and is seeking your feedback.

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.

Please provide your feedbacks using the Feedback form and send it directly to sdgimpact.standards@undp.org by 17th July 2020.

The Guiding Questions and Frequently Asked Questions are also provided to assist in focusing feedbacks.
For more information, please visit the website: https://sdgimpact.undp.org/ .

Consultation: Revisions to the International <IR> Framework
Organised by: International Integrated Reporting Council (IIRC)

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.

The consultation is open until 19 August 2020, with further details available via www.integratedreporting.org/2020revision

Webinar: Ensuring a Sustainable Recovery in the ASEAN region: What Role for the Finance Sector?
Date & Time: 11th June 12:30pm HKT
Organised by: ILO, UN Women, UNICEF, UNHRSP, United Nations ESCAP and Business & Human Rights Asia Pacific

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.

Webinar: Growing Sustainable Finance in Asia in the New Normal
Date & Time: 18th June 9:30pm HKT
Organised by: Impact Entrepreneur, LLC

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.

Sustainable Finance Webinar Recordings:

Sustainable Finance Reports & Research

1. New Report: Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?
Published by: Oxford Smith School of Enterprise and the Environment

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.

2. New Report: From farm to table: Ensuring fair labour practices in agricultural supply chains (Results from PRI Collaborative Engagement 2017-19)
Published by: PRI

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:

Fitch’s ESG Framework and Coronavirus: A look at the short and longer-term implications of Coronavirus through Fitch’s ESG Relevance Score framework, including how deterioration of balance sheets may affect policy and ESG-related investments, as well as greater scrutiny of “social licenses to operate”.
Coronavirus May Slow but Won’t Derail Low-Carbon Transition: A deeper dive into how Coronavirus may affect climate risks and regulations both in the short and medium term.
Crisis Conditions to Expose Governance and Credit Risks: A look at how tougher economic times can reveal governance failures, and leave creditors of the affected companies exposed to potential losses.

What is Green?

Idea Exchange – Karen Ho

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.

恒指現在還是大家心裡面的恒指嗎?

香港地球之友綠色金融顧問

恒生指數有限公司上週一宣布將同股不同權公司(W股)及第二上市公司(S股)納入選股範疇,下次季度檢討開始實施,這類公司預料最快可於本年9月染藍。

目前市場上有三間W股:小米(1810)、美團點評(3690)及阿里巴巴(9988),當中阿里巴巴同時被界定為S股。

同股不同權公司

W股在香港算新事兒,小米2018年上市,是香港第一間W股。恒指之前對此類公司拒諸門外,主要因為W股的股權架構跟一般上市公司有差異。W股有兩類股份,其中一類擁有一股多票(投票權),另一類則為正常之一股一票股份,因此W股的管治常被質疑,不合比例的投票權分配,可能損害到一般股東的利益。

以小米為例,從下圖可見,若按投票數目分佈算出大股東的持股量不足50%,但以投票權來量度的話,大股東卻有接近8成的佔有率,絕對可以控制決議方案結果,這就是W股不公道的地方。

美團點評情況比較均勻,持有一股多票的大股東實際操控約6成投票權,雖然表面上他們只持有13%股份。阿里巴巴則只有一股一票的股份,但由於其合夥的董事提名權在港交所的定義下也被視作同股不同權,所以亦當W股。

不過說實話,買入一隻股票,大多數人的目的是「投資」而並非「投票」。這看法估計也反映在恒指諮詢的結果中,逾9成人士皆贊成納入W股至恒指選股範疇,雖然這群和議者中都有一半人士表示希望限制W股在恒指裡的佔比。恒指公司亦同意先採用較審慎的方法,為這類可能加入的新成員套上5%的個股比重上限。

人人都愛阿里巴巴

之前提到阿里巴巴除了屬於W股,也是以第二上市模式的S股。雖然其在港的成交額幾乎每天都是排名前五,但目前約8至9成交易卻來自紐約交易所買賣的美國存託股(ADS)。就此,恒指公司考慮S股公司時,決定只計算它們在港註冊的股本及扣除掛鈎ADS的股票作自由流通股份。原來市值逾4萬億港元的阿里巴巴(全港最大),在此情況下如被納入恒指,估計比重只有3至4%,比港交所、中移動更要小一點。

筆者個人認為這次恒指諮詢W股、S股染藍獲得一面倒的支持,主要是大眾對阿里巴巴感興趣。早在紐約交易所上市前,阿里巴巴集團下的阿里巴巴網絡(1688)已經自2007年起在香港掛牌交易。直至2012年因集團重組,阿里巴巴網絡才在港下市。不少香港市民亦習慣性使用阿里巴巴的產品如淘寶、天貓,可以說香港人非常知道阿里巴巴,非常熟悉阿里巴巴的業務,所以無論其是S股或W股,大家都覺得阿里巴巴夠「入屋」,「夠格」染藍。但對另外兩家可能納入的S股、W股,雖說市值及成交不俗,但觀乎它們的財務情況(2017、2018財報均顯示虧損),筆者個人相當保留。假設它們真的入選恒指,估計美團點評比重可達上限5%,甚至大於阿里巴巴。

恒指50

恒指自1969年成立至今已超過50年。過去33家成份股,每個香港人都知,每個香港人都懂。2007年起成份股數目擴充至50家,市場涵蓋率稍稍提高了,但成份股公司的「知名度」、「入屋度」卻好像不升反退。恒指納入什麼成分股沒有對與錯,但希望恒指的定位可以更清晰:到底是要讓恒指有廣泛的市場涵蓋,還是想營造一隻高質藍籌指標?要「濫」還是「精」?這點還真望恒指公司好好思量,免得搞到指數身份尷尬。

圖片來源:AP photo/Standard

Green bonds after the virus – Hong Kong can lead the way

Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)

In the midst of the enormous credit boom around the world, fuelled by the coronavirus panic, green bond markets have been largely closed for business from new issuers. As a response to the virus, several governments and multilaterals have issued social bonds, but choice for investors has been limited.

Happily, green bond sales are now rebounding in Europe. Six companies have launched bonds this month, including Credit Suisse Group, E.On and Swisscom, while Belgian waste water company, Aquafin, is expected to follow soon.

Secondary trading (bonds already out in the market) has held up better, with demand for green bonds holding firm, even among the dramatic sell off seen in recent weeks. There are very few green issues so far from corporates which have particularly suffered in the downturn – such as the oil and gas or consumer sectors – which has helped the asset class as a whole.

Hong Kong’s green bond market was doing quite nicely before the coronavirus hit. Hong Kong issuers raised a total of HK$20 billion during 2019, with companies coming to market including both financial and non-financial corporates. The Hong Kong government was also a major participant, launching the first tranche of its HK$100 billion sovereign green bond programme.

It is to be hoped that Hong Kong will resume its activity in this space as markets settle. As well as being a centre for banks, multilaterals and blue chip corporates to raise funds, the expertise we have locally should enable Hong Kong to be a centre of innovation in the green bond sector. Using the financial markets to refinance and recycle capital, especially for smaller businesses, will be essential to accelerating the flow of funding to green activities. And moving away from “vanilla green” bonds to more diversified products, such as project, resilience and transition bonds may attract both new investors and more varied issuers. Hong Kong can lead the way.

What the pandemic shows us about the economy and our lifestyle?

Green Finance Advisor of Friends of the Earth (HK)

While the current public health situation has induced a temporary shutdown of the world’s major economies leading to significant economic stress for governments as well as substantial segments of the world’s population, it has also showed us how changing some of our habits can lead to a greener world.

For example, the BBC reported in February of NASA satellite images showing a dramatic decline in pollution levels in China as a result of the lockdown that bound ordinary citizens to their home and led to temporary closure of all non-essential businesses (BBC News, 2020).

BBC News, 2020

Separately, the FT reported that while air travel has grounded to a halt and risk affecting many livelihoods in the industry, the upshot is that air pollution has also fallen significantly (Ft.com, 2020).

While the impact on the aviation, oil & gas, travel, and retail industries are regrettable, the health pandemic does show us if we adjust our lifestyle to adopt greener living practices, such as:

  1. Reduce non-essential air travel: the no-fly movement is at the forefront to practice travel by avoiding flying altogether (Timperley, J., 2020). While this may be a drastic goal for many of us, we can always begin by cutting non-essential business trips for example from four trips a year to two trips a year and making more use of video conferencing tools that are getting better by the day.
  2. Reduce the amount of fast fashion we purchase: with the lockdown comes reduced social gatherings, which also reduces the need for us to dress to impress. But do we really need so many pair of jeans, or so many different pairs of shoes? The pandemic should help us to see what is essential in our wardrobe and figure out how to dress smartly but reducing waste at the same time.
  3. Finally, this natural experiment of working from home has shown that for certain industries, it is possible to function at normal capacity (Capradio.org, 2020). If employers can learn from this experience and adopt a flexi-approach to working from home, such as half the workforce works from home half the week and rotates onsite with the other half working from home in the second part of the week. This can reduce the carbon footprint of the daily commute, as well as less requirement for office space, which in turn reduces the pollution generated from construction and the day to day pollution from operating the lighting and ventilation provisions for offices.

If these practices are widely adopted as societies emerge from the pandemic lockdown, the investment implications should benefit those companies who score strongly in ESG compliant measures, and overtime, ESG investing will not only be seen as allocation of capital to mitigate against unsustainable practices, but instead as a wholistic investment in the economy of the future.

References

BBC News. 2020. Polluting Gases Fall Rapidly As Coronavirus Spreads. [online] Available at: <https://www.bbc.com/news/science-environment-51944780> [Accessed 11 May 2020].

Capradio.org. 2020. The ‘Unprecedented Natural Experiment:’ Stay-At-Home Order Reduces Air Pollution, Offers Clues In Climate Change Fight. [online] Available at: <https://www.capradio.org/articles/2020/04/14/the-unprecedented-natural-experiment-stay-at-home-order-reduces-air-pollution-offers-clues-in-climate-change-fight/> [Accessed 11 May 2020].

Ft.com. 2020. Aircraft Emissions Fall Sharply As Pandemic Grounds Flights. [online] Available at: <https://www.ft.com/content/c736cd3c-1457-440b-af07-4061afb35bc9> [Accessed 11 May 2020].

Timperley, J., 2020. Why ‘Flight Shame’ Is Making People Swap Planes For Trains. [online] Bbc.com. Available at: <https://www.bbc.com/future/article/20190909-why-flight-shame-is-making-people-swap-planes-for-trains> [Accessed 11 May 2020].