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Special thanks to HSBC for hosting the briefing as well as Principles for Responsible Investment (PRI), a United Nations backed investor initiative, for providing a global perspective on the topic of "The Future of Sustainable Finance". The event occurred after the 11th ASrIA Annual General Meeting.
November 24th was quite newsworthy in the Asia Pacific region as ASrIA held this investor briefing and the Board of the Securities and Exchange Board of India (SEBI) mandated listed companies to submit 'Business Responsibility Reports'. The Chinese saying 好事成雙 ("Good things happen in pairs") captures the mood.
Rebecca Mikula Wright, ASrIA General Manager, gave a warm welcome to the participants at the ASrIA briefing, introducing the speakers - Dr Wolfgang Engshuber, Chairman, PRI Advisory Council (PRIAC) & PRI Association (PRIA), Xavier Desmadryl, Global Head of ESG Research and PRI, HSBC Global Asset Management and Alexandra Boakes Tracy, Chairman of ASrIA.
Dr Engshuber opened by stating that the Global Financial Crisis reminds financial market participants, asset owners in particular, that the long-term sustainability of the markets depends on active investor involvement. . The sheer scale of the challenge to confront the environmental and social challenges is daunting. Engshuber noted, for example, that in 2008 there was an estimated US$6.6tn in annual environmental costs from global human activity. To put that into perspective, this means environmental costs totaled 11% of global GDP in 2008. Cash outflow for BP's oil spill costs and provisions totals US$25bn as of end 3Q 2011 (see slide 15). Closer to home, TEPCO still wrestles with controlling the Fukushima nuclear disaster nine months after the accident when the company reported some 45,000 liters of highly radioactive water leaked from the station earlier in December 2011.
Engshuber emphasised that external demands on enhanced corporate disclosure is not sufficient to mainstream the inclusion of environmental, social and corporate governance (ESG) in investment decision-making. What is also vital is investor reporting and disclosure of their own operations. The PRI reporting and appraisal process is getting a major upgrade and is engaging an IT provider to streamline the process. In addition to the reporting overhaul, he stressed that PRI, as a "global network of network," is not in competition with ASrIA and our sister organizations of country and regional sustainable investment forums.
After the PRI perspective, Xavier Desmadryl gave a PRI signatory viewpoint on integrating ESG into investment activities. He began with HSBC's investment approach and philosophy. He noted, for example, that no one is alone in the value chain, using the case of the series of suicides at Foxconn. Social tensions are growing as Labor Notes reports a second wave of labor strikes in as many years across southern China impacting a range of industries. In another case, he noted that recently portfolio managers passed on an investment opportunity of a Thai fishing company due, in some measure, to ESG concerns. According to Responsible Research, of the 40 listed companies they examined only Thai Union Frozen Products had a publicly disclosed sustainability policy related to its seafood-related business activities.
Next Alexandra Boakes Tracy gave us an overview on the establishment of the Asia Investor Group on Climate Change so that asset owners in the region can collaborate more effectively. Using the Pearl River Delta (PRD) in southern China, she illustrated climatic projections for some of the world's most productive factories and a key global logistic hub. She demonstrated different "what if" scenarios of increased storm activity resulting in flooding or longer term rising sea water levels on the PRD region.
A lively Q&A followed the speakers' presentations.
Some hours after the event, India's sustainable finance and responsible investment market got a nice shot in the arm as the Securities and Exchange Board of India (SEBI) mandated listed companies to submit 'Business Responsibility Reports'. SEBI's phased approach covers the 100 largest listed companies by market capitalization (not clear the 'as of' date for the market cap calculations), with the goal of including more companies in the future. SEBI also offered substantive guidance in terms of what companies must disclose by referring to the 'National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business' from the Ministry of Corporate Affairs. However, this news is tempered by what was not said - financial markets await a timeline for companies to implement this new mandate. Sincere thanks to HSBC for their venue support, to UNPRI, and to audience participants for making this event such a success. |
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