Covid-19 a driving force as more firms in Asia-Pacific embrace sustainability in finance: Citi report

SINGAPORE – The Covid-19 pandemic is prodding firms in the Asia-Pacific to action on sustainability, with many already embarking on meeting environmental, social and governance (ESG) goals, said a new report by Citi on Tuesday (July 13).

The survey found that 54 per cent of the respondents already have ESG policies and practices integrated in their organisations’ corporate strategy.

Nearly 90 per cent of the remaining respondents said they intend to roll out ESG policies and practices within five years.

“Evidently, sustainability is coming of age in this region,” Citi said in a media statement.

“With Covid-19 presenting new challenges, ESG issues that were previously on the periphery are now in the forefront for many companies.”

Over two-thirds of the respondents said Covid-19 was a driving force of ESG policies and practices in their firms, the report showed.

A total of65 per cent also said that alignment to overall corporate sustainability strategy was a main driver behind the adoption of ESG standards.

Other reasons that drove firms to adopt such standards include the desire to make a positive impact on their relationship with customers and stakeholders, social and environmental factors, and regulatory obligations, as firms pre-empt broader policy and regulatory changes.

They also said that they adopted such standards because of access to funding dedicated to ESG projects.

Citi Asia Pacific chief executive Peter Babej said: “As a global, value-driven firm, we are dedicated to supporting the transition to a low-carbon economy.

“We view sustainable financing both as a mandate and as an opportunity to partner with our clients across geographies, to help them decarbonise their operations and achieve their enterprise sustainability goals.”

When asked to choose the top sustainable and green finance instruments to help them meet their goals, respondents selected green bonds, ESG-linked working capital financing and green loans.

The report said: “The momentum is set to continue with increasing focus on ESG by corporates, and higher expectations and demands from stakeholders of firms to be accountable across the entire environmental, social and governance spectrum.”

The survey was conducted by Citi in the first quarter of the year among 259 institutional clients in 14 markets across the Asia-Pacific.

The majority of the respondents hold senior positions in their firms, including chairmen, presidents or chief executives, managing directors and other C-suite executives.

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The report also highlighted the growth in environmental finance in the region. Citi raised over US$25 billion (S$33.8 billion) for clients in the Asia-Pacific in the first half of this year, an increase of some 400 per cent compared with the same period last year.

“The scope of our sustainable financing efforts is growing continuously and covers all client segments – from investors re-positioning their portfolios toward greener industries, to corporates realigning their business models through acquisitions and divestitures,” Mr Babej said.

In April, the bank committed US$1 trillion to sustainable finance by 2030. This figure includes extending its environmental finance target from US$250 billion by 2025 to US$500 billion by 2030, to further accelerate the transition to a sustainable and low-carbon economy.

Its commitment also includes an additional US$500 billion to invest in other activities that advance the United Nations’ Sustainable Development Goals (SDGs), such as education, affordable housing, healthcare, economic inclusion, community finance, international development finance, racial diversity and gender equality.

Mr Babej added: “In this effort, we are conscious that our region is in a critical position – both in accounting for almost half of global emissions, and in its particular exposure to climate-driven human and economic risks.

“Asia can and must be a leader in driving positive change across the globe.”

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The Bank of Singapore also announced on Tuesday that it will be the first in Asia to incorporate ESG factors in the assessment of the loan quantum for investment financing.

Investment financing is commonly used by wealthy individuals in growing their wealth and enhancing investment returns.

“By offering a higher financing quantum for highly-rated sustainable mutual funds, the bank aims to encourage high net worth individuals to invest sustainably by integrating ESG factors into their portfolios,” it said.

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