UN Assistant Secretary General and Head of UN Environment Programme Mr Elliot Harris
Ladies and Gentlemen
- A very good afternoon to everyone. I would like to express my gratitude to the United Nations Environment Programme (UNEP) for inviting me to participate at the 2016 Sustainable Stock Exchange (SSE) Global Dialogue.
- First, let me congratulate the United Nations Conference on Trade and Development, United Nations Global Compact, the UNEP Finance Initiative, and the United Nations-supported Principles for Responsible Investment for successfully organising this Dialogue. Singapore is honoured to host this important event which gathers global stock exchanges, representing 70% of the world’s equity markets, that have publicly committed to promote sustainable finance in their markets.
- It is timely that this high-level dialogue is being held, for stock exchanges, regulators, and companies around the world to discuss ways to enhance corporate transparency and performance on environmental, social and corporate governance issues. Last year, countries came together and adopted landmark global accords, such as the 2030 Agenda for Sustainable Development (2030 Agenda) and the Paris Agreement on Climate Change, to ensure that the pursuit of economic development today will not compromise the ability of future generations to meet their own needs. However, the true test of our commitment to these important new global agendas will be in their implementation. Therefore the theme for the dialogue: “A New Global Agenda” is apt and timely. I would like to make a few key points.
New global agendas call for a new paradigm
- First, we cannot carry on with business as usual in the light of the new global agendas. The impacts of climate change are real and are already being felt around the world today. According to NASA, 2016 is on track to be the hottest year ever on record, with each of the first seven months, from January to July, setting new temperature records. We have also experienced extreme weather events such as droughts and devastating floods that affect millions of people in various countries. An article on New York Times published just 3 days ago reported that scientists’ warnings on how global warming would eventually jeopardise the United States’ coastline were no longer theoretical. The article pointed out that scientists have in fact documented a sharp jump in tidal flooding on the Atlantic and Gulf Coasts in recent years. And countries no matter how large or small, like Singapore, are not spared from far-reaching climate consequences. As such, concerted efforts to tackle climate change are essential for sustainable development.
Importance of sustainable development for business
- For businesses, the impact of environment-related risks can be equally significant. According to a UN report, a further warming of two degrees could cause economic losses of 2% of world GDP. In this region, we have suffered from transboundary haze pollution caused by land and forest fires, which is symptomatic of the underlying problem of unsustainable production and consumption. Our region suffered heavy economic losses as a result of last year’s transboundary haze pollution. The Indonesian Government estimated the cost in dealing with the 2015 crisis was approximately S$47 billion while Singapore suffered some S$700 million of economic losses.
- The impact on businesses can manifest in various forms; loss of productivity, increased operational costs and additional infrastructure, manpower and technology costs. Hence, it is in the best interests of the business community to integrate sustainable practices into their core business strategy. This includes adopting sustainability reporting, sustainable procurement, as well as promoting corporate transparency and accountability, which increases the organisation’s ability to create and sustain value.
Singapore’s contributions as a financial centre
- The financial sector has a unique role to play in catalysing broader adoption of sustainability practices in the economy. There are two inter-locking roles that it can play: First, financial institutions themselves need to adopt sound sustainable financing practices when they provide financial products and services to clients. Financial institutions also need to be able to assess and manage the risks that climate change may pose to its business and customers. Second, financial institutions can play an important role in mitigating sustainability risks by working with its customers to address weaknesses in their current business models and channelling capital in ways that will support sustainable development.
- Singapore has taken the practical approach of adopting international standards and market-led best practices, which are suited to the global and regional financial institutions operating here.
- The Association of Banks in Singapore (or ABS) had issued a set of responsible financing guidelines for banks in Oct 2015 and is working closely with the banks in Singapore to implement these by 2017.
- The community of institutional investors and asset managers in Singapore are beginning to understand how investing in companies with environmentally and socially sustainable practices and good corporate governance can enhance the returns of their investments over the long term. The industry is developing a set of stewardship principles for responsible investing.
- Many global insurers with presence in Singapore have adopted global principles on Sustainable Insurance. These principles are factored into the firm’s activities across the insurance value chain, including company strategy, underwriting, and investment decisions.
- Complementing the efforts of the financial institutions, stock exchanges have a crucial role to play in promoting greater information sharing and disclosure by companies, through introducing appropriate reporting requirements, and offering critical information and comparability solutions. In 2011, SGX introduced a voluntary Guide to Sustainability Reporting for Listed Companies.More recently in June this year, SGX issued its new “comply or explain” Sustainability Reporting Guide.
- Sustainability reporting augments financial reporting and enables investors to assess more comprehensively the company’s prospects and quality of management. The increased non-financial disclosures enhances transparency and build investor understanding and trust over time.
- SGX’s approach to sustainability reporting will afford companies the necessary latitude to report in a way which best suit their industry and circumstances. To further advance companies on their sustainability reporting journey, SGX is working with the Global Compact Network Singapore to organise training workshops by sustainability reporting consultants.
- SGX’s comply or explain regime will take effect for listed companies from the financial year beginning or after January 2017. This will be a key milestone as sustainability reporting will become a core mainstream discipline for companies, rather than a niche activity. This is also timely – with increasing demand for sustainability data increasing globally, high quality sustainability reports by companies listed on SGX will put them on the radar of a wider universe of global investors, thereby broadening the investor base of Singapore’s public equities market.
- Overall, these are commendable progress and I urge financial institutions to continue to drive the growth of sustainable finance.
- The point I want to leave you is this: We are making good progress in our sustainability journey and I urge all stakeholders to continue to provide meaningful disclosures to strengthen market discipline, raising the standards of sustainable finance globally and in Singapore. The sustainable financing agenda cannot be achieved by the government alone – we also need other stakeholders to send the right signals. Nestle and Unilever’s suspension of supply contracts with palm oil supplier IOI; Wilmar and Musim Mas’ stopping of supplies from palm oil company Korindo following allegations of its illegal forest burning in Papua province by environmental alliance Mighty; and the dropping of 11 companies by Norway’s Government Pension Fund Global because of the companies’ connection to deforestation; have shown the building up of proactive and responsive actions to the challenges of climate change and sustainable development by stakeholders.Indeed, if it were true that sustainable finance is the future, then the institutions should pay attention and shape this future. Working towards a sustainable and prosperous future, does not mean that we need to invest more – just that we need to invest more wisely.
- Thank you very much.
 Fifth Assessment Report (AR5) of the UN Intergovernmental Panel on Climate Change (IPCC), 2014. The report cautioned that this estimate is incomplete, and that “losses are more likely than not to be greater, rather than smaller, than this range…Losses accelerate with greater warming, but few quantitative estimates have been completed for additional warming around three degrees or above.”