Executive Summary
Human life is inextricably intertwined with nature. We rely on plants, animals, air and water to sustain life and economic activity. This reliance, however, has left its mark. As we draw down on our stock of natural capital, we are edging close to – or in some cases even past – the “planetary boundaries” that scientists use to define the safe limits for human existence on earth.
This paper calls on financial institutions to recognise their position in this relationship between economic activity and nature. The degradation of nature represents a risk to companies’ activities and, by extension, to financial portfolios. Revenues may come under threat, or companies may have to incur additional costs from new regulations or increased consumer scrutiny. Both lenders and investors must bear these risks in mind. The first step for financial institutions is to better understand the materiality of those risks to their portfolios. This paper offers a roadmap for such an assessment, mapping Southeast Asia’s GDP figures to publicly available data on the impacts and dependencies of industries and sectors. Our analysis suggests that several sectors of economic importance to the region – namely agriculture, mining, manufacturing and real estate – have large impacts and/or dependencies on nature. This means investors and banks in the region may face material nature-related risks. The next step, then, is for financial Institutions to examine specific areas of risk (which are often hyper-local), the specific practices of the companies they invest in or lend to, and the policy environments where these companies operate. This paper outlines the case for such specificity, and presents (in the addendum) a practical guide on how to get started.
The risk posed to nature comes also with opportunities for financial institutions to finance nature-positive technologies. This investment opportunity is not well recognised, partly because definitions of what is nature-positive may be too theoretical or focused only on niche, non-viable investments. We propose taking a broad view of nature-positive activity that encompasses a wider range of opportunities, such as green building development, regenerative agriculture, water efficiency improvements, pollution reduction and waste management – and is more likely to catalyse investment.
We believe now is a good time for financial institutions to increase their proactivity in nature financing. That means understanding the materiality of nature risks and opportunities, embedding these considerations in internal processes and pursuing new business opportunities. In doing so, financial institutions will both address nature degradation in the real economy and grow their businesses.
Our discussion would not be complete without also touching on the involvement of policy makers, financial regulators and real economy players. At the policy level, we advocate work at a national level on a regulatory agenda for nature conservation and restoration. This should be anchored in expectations for economic sectors, with guidance by financial regulators for financial actors. The development of local nature risk scenarios (a requirement for the quantification of nature risk) and sectoral pathways (needed for further target setting) should complement that guidance.
At the industry level, we recommend collaboration between the financial services sector and real economy players. In particular, industrial sectors with high impacts or dependencies on nature will require financing; both sides must work on unlocking barriers to this. Collaboration should also include standardising data reporting and metrics, and the standards around nature financing – both of which can enable the scaling up and reporting of nature financing efforts.
Acknowledgements
This report was developed by the Natural Capital and Biodiversity (NCB) workstream of the Singapore Sustainable Finance Association (SSFA), with inputs from workstream members, and reviewed by the Workstream Co-leads and the SSFA Executive Committee (EXCO).
This workstream is co-led by Eric Lim, Chief Sustainability Officer, United Overseas Bank (UOB), Valerie Lau, Lead APAC Sustainability and Impact, UBS, and Eric Nietsch, Head of Sustainable Investing, Asia, Manulife Investment Management, with Oliver Wyman as the knowledge partner. The workstream is coordinated by the SSFA Secretariat and supported by the Monetary Authority of Singapore (MAS).
This document does not necessarily represent the views of the Workstream Co-leads, any individual member of the workstream, or the SSFA EXCO.
| No. | Organisation | Name | Designation |
|---|---|---|---|
| 1 | United Overseas Bank (UOB) | Eric Lim | Chief Sustainability Officer, and SSFA NCB Workstream Co-lead |
| 2 | UBS | Valerie Lau | Lead APAC Sustainability and Impact, and SSFA NCB Workstream Co-lead |
| 3 | Manulife Investment Management | Eric Nietsch | Head of Sustainable Investing, Asia, and SSFA NCB Workstream Co-lead |
| 4 | Oliver Wyman | Timothy Colyer | Head of Climate and Sustainability for Asia, and SSFA NCB Workstream Knowledge Partner |
| 5 | Amundi | Sylvia Chen | Head of ESG, South Asia |
| 6 | BlackRock | Heidi Yip | Head of Sustainable & Transition Solutions, Asia ex-Japan |
| 7 | Bloomberg | Christian O’Dwyer; and Isaac Lee | Sustainable Finance Solutions Product Manger; and Sustainable Finance Solutions Lead, APAC |
| 8 | BNP Paribas Asset Management | Jane Ho | Head of Stewardship, Asia Pacific |
| 9 | CDP | Rida Nurafiati; and Frederik Buchholz |
Nature Project Manager, Capital Markets APAC; and Senior Manager – Nature, Thought Leadership |
| 10 | Conservation International | Jan Yoshioka | Vice President, Sustainable Finance |
| 11 | DBS | Chua Kai Ting | Associate, Group Sustainability |
| 12 | ERM | Ashley Chua | Biodiversity and Social Specialist |
| 13 | Spencer Low | Head of Regional Sustainability, APAC | |
| 14 | HSBC | Frances Chen | Head of Sustainability, ASEAN |
| 15 | KPMG | Jade Feinberg | Director, ESG Advisory |
| 16 | Natixis Corporate & Investment Bank | Olivier Menard | Managing Director, Head of Green & Sustainable Hub APAC |
| 17 | OCBC | Chng Bee Leng | Head, Group Risk Policy, ESG Risk & Sustainability |
| 18 | Prudential Plc | Liza Jansen | Group Head of Responsible Investment |
| 19 | Robeco | Rinchen Choegyal; and Laura Bosch Ferreté | Senior Technology Analyst, Sustainable Investment Research; and Sustainable Investment Specialist |
| 20 | S&P Global Sustainable1 | Cheryl Tay | Account Director, ASEAN |
| 21 | Singapore Green Finance Centre (SGFC) | Nikki Kemp | Centre Director |
| 22 | Standard Chartered | Audrey Lim | Director, Nature Finance |
| 23 | Sumitomo Mitsui Banking Corporation (SMBC) | Priya Bellino | Head of Sustainability Solutions Group, Corporate Banking APAC |
| 24 | Temasek | Franziska Zimmermann | Managing Director, Sustainability |
| 25 | The Nature Conservancy | Yap Su-E | Corporate Engagement Director, Asia-Pacific |
| 26 | University of Cambridge Institute for Sustainability Leadership (CISL) | Sara Taaffe | Programme Manager |
| 27 | Monetary Authority of Singapore (MAS) [Observer] | Lim Bey An | Director, Capabilities, Enablers and Partnerships Division, Sustainability Group |
| 28 | National University of Singapore (NUS) [Observer] | Roman Carrasco | Associate Professor and Deputy Head of Department, Department of Biological Sciences |
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