HSBC at the Singapore FinTech Festival – Day 3

The past 18 months have seen many institutions commit to promising a net-zero carbon output, and there is growing recognition as to why this has become important. Institutional investor’s influence over the transition to a lower carbon economy has grown as they allocate and attract more capital to strategies which invest in line with ESG principles. During day three of the Singapore FinTech Festival there were several discussions around the key role of banking institutions in delivering sustainable financial services.

Notably, Zoë Knight, Managing Director & Group Head of the HSBC Centre of Sustainable Finance, HSBC, in the “Roundtable in Partnership with Ecosystem: Scaling Sustainable Finance for a Green Recovery” session, described the need for banks to collaborate with the public sector and other financial institutions on scaling sustainable financing and investment to realise the goal of net zero.

Below is a summary of the key insights:

The “Financial institutions and infrastructure providers’ roles in facilitating the transition to net zero” and “In Conversation with Syfe” sessions featured speakers from Marketnode, HSBC and Syfe, who engaged in wide-ranging discussions on how sustainable banking products paired with green infrastructure projects can help move the needle on the world’s growing net-zero ambitions.

• Financial institutions and infrastructure providers have a vital role to play in the transition to net-zero. At the moment 61% of countries worldwide have committed to the goal of reducing emissions by 2050, but there is no consistent framework for evaluation of this in place – meaning the transition from rhetoric to action must be the immediate priority.
• Within the FTSE100, almost 50% of companies do not have a net-zero target, and only 23% have had theirs scientifically approved. This is a clear sign that those on the top need to start leading the way by setting clear ESG targets. Blockchain and data, as well as solutions such as the HSBC ESG Portfolio Reporting Service can help in this regard by improving transparency and monitoring of key ESG metrics.
• Public funding alone cannot cover the cost of the climate transition across Southeast Asia. HSBC partnered with Temasek to provide US$150 million in financing for marginally bankable sustainable infrastructure projects. Catalysing capital in this way highlights both the urgency and the responsibility which lies with financial institutions in the transition to net-zero.
• Technology-first wealth management companies like Syfe have an important role to play in this transition. Through their products, which are designed to lower the barriers to entry into wealth solutions, Syfe is able to deliver the same underlying portfolio to their customers regardless of their level of investment, providing greater optionality to more people.

Other insightful discussions occurred during the “Embedding Climate Risk Management in Enterprise Risk Management (ERM)” and “Harnessing the Power of Artificial Intelligence for ESG Data and Accelerating Green Finance” sessions, where HSBC speakers spoke on the experience of designing and implementing a climate risk governance and management framework at the bank, as well as the evolving market for sustainable financing and why industry collaborations and technology are key to mitigating climate risk, both globally and in the local Singapore context:

• Financial institutions should set up dedicated committees at the senior management level to oversee climate risk and focus on green skilling to improve environmental risk management.
• FinTechs can help resolve the challenge of obtaining adequate green data to measure and mitigate climate risk by providing standardised data platforms and multiple use cases for financial institutions to utilise.
• Standardising the questions asked to companies regarding their climate management disclosures is a challenge as regulations vary globally. Adopting a consistent transition risk assessment approach across the banking industry will be important to ensure meaningful engagement with clients on climate issues.
• In Singapore, the Monetary Authority of Singapore’s Green Finance Industry Taskforce (GFIT) was created to develop guidelines focused on identifying and assessing the climate risk in customers’ portfolios, setting appropriate governance policies and embedding effective risk management practices in organisations.
• Artificial intelligence is driving efficiency in risk management by collating emissions data and ensuring data integrity in green financing decisions. This is giving banks like HSBC more confident in the ESG performance of their clients and improving their capabilities in ESG-related scenario analysis and stress testing.

The sessions on “ESG Investing in Alternatives and Opportunities in FinTech” and “Future of Banking – How HSBC Partners and Invests in FinTechs to Create New Customer Value and Differentiate HSBC for Future Growth” featured HSBC speakers, who discussed how the investment market for alternatives is changing to become more sustainable, the shifting priorities and expectations of investors, as well as the role of FinTech investment in facilitating ESG growth.

• Alternative funds are quickly positioning themselves as sustainable, responding to investor pressure as well as the launch of regulatory frameworks such as the Sustainable Finance Disclosure Regulations.
• Culture is key when it comes to ESG investing – alternative investment teams need to ensure they are looking at their portfolios through a sustainability lens whilst leaning on external training bodies to amplify this perspective.
• FinTechs have a key role to play in supporting ESG investment decision-making through efficient data collection and analysis as well as identifying and mitigating against downside risks. HSBC Asset Management's newly launched venture capital strategy supports sustainability-focused FinTechs on their early-stage investment journeys.  
• Banks can support FinTechs by acting as a platform that connects them to opportunities for financing. HSBC is making strategic investments into innovative FinTechs across the ESG space – focusing on areas such as transparency, ESG data and supply chain management.