The top three drivers for investors to care about environmental and social issues are the possibility of improving risk and returns, cited by 49 per cent, the pressures from societal expectations (43 per cent) and regulators requiring it (41 per cent), the same survey showed.
In an article by the World Economic Forum, as supported by HSBC, it pointed out that corporates who act early can build a competitive advantage.
“CEOs who align their businesses to a net-zero future not only shield themselves from risks but also position their businesses for growth in new green markets. Fortunes will be made and lost in this shift,” it said.
“We have already seen a sizeable transition in the power sector with the rapid decreases in wind and solar costs—some players are now reaping the rewards, while others commit to major write-downs. The rapid growth in green financing is enabling those who act now to access lower capital costs for new projects.”
Amid the opportunities, the attention to ESG concerns is thus a reflection of an insurance premium against risks ahead in ignoring climate change.
HSBC’s Fragile Planet report cited data from the Emergency Events Database that suggested damage costs relating to extreme events in the G20 alone totalled US$978 billion in the decade to 2018, up from US$630 billion in the decade to 2008.
The report noted that both climate change developments and the pandemic are having “profound effects” on commodity markets.
“The pandemic is expected to change some demand patterns permanently. In particular, working-from-home will accelerate digitalisation and reduce travel – with implications for oil demand. At the same time, the Covid-19 shock and the government spending programmes it prompted – plus a new US administration, the European Green Deal and Beijing adopting a net-zero target – have bolstered the momentum in global climate-change policy,” the report showed.
“The intertwined nature of shifting climate change realities, policies and attitudes and the impact on commodity markets has increasingly meant that tracking and forecasting commodity market developments involves a clear perspective on climate change developments. In our view, commodity markets and climate policy cannot usefully be assessed in isolation, so much of our recent commodities coverage explicitly seeks to set out climate policy views to underpin the commodity market forecasts.”
To add, government policy changes are motivating reduced carbon emissions, decreasing demand for carbon-intensive products, such as coal and oil. Instead, there is favour in commodities used in cleaner energy production, such as the battery and electricity network-related materials, lithium, cobalt and copper.
Meanwhile, the supply-side for many commodities has also been heavily impacted by changing policies and attitudes towards climate change, the report said.
“Over the past couple of years, there has been a distinct and rapid shift in corporate and investor policy. Major corporates across the world have sought to adopt net-zero emissions strategies. Large fund managers have been shifting their investment mandates, shunning investment in higher carbon-emitting technologies, such as coal mines. Financial innovations, such as green bonds, are facilitating these shifts.”
HSBC will provide up to US$1 trillion in sustainable financing and investment by 2030 to support clients in their own transition to more sustainable ways of doing business.
HSBC Singapore is chairing an industry taskforce to accelerate green finance, and in 2021, piloted the Green & Sustainable Trade Finance and Working Capital (GTF) Framework, a guide for banks and financial institutions in extending green financing to buyers and suppliers.
Since October 2021, HSBC Singapore has also been offering corporate clients access to the Enterprise Financing Scheme-Green (EFS-Green scheme), as launched by Enterprise Singapore. The scheme offers up to 70 per cent risk share to catalyse lending for emerging green-growth sectors aligned to the Singapore Green Plan 2030 and which develop technologies and solutions contributing to the reduction of waste, resource use or greenhouse gas emissions.