With sustainability on everyone’s mind, investors want to find solutions that benefit people, planet, and profits. We ask financial experts, top banks and mutual funds to get down to the green bottom line, and find out what it takes to feasibly decrease our carbon footprint

There’s a slim chance that the cash in your bank account is a direct cause of greenhouse emissions. Slim, but not zero. However, it’s the investments you explicitly make with financial institutions that have a bigger impact, positive or negative, on the environment.

Ever since 2015’s Paris Agreement on climate change, almost every global bank has made a commitment—fiscally or otherwise—to reducing its carbon footprint. For instance, Goldman Sachs announced that they would spend US$750 billion on green initiatives and funds over the next decade, and Citigroup has committed US$1 trillion to sustainable finance from now until 2030. However, investors can still nudge financial institutions in the right direction by choosing how and where to invest their sums. 

We speak to financial experts and heads of the financial institutions in the world to uncover what makes our investments green.

Don't miss: 7 Lessons From Trina Liang-Lin’s Work in Finance and Philanthropy

Leading The Climate Conversation

According to climate non-profit organisation CDP, “almost all climate-related impacts and risks of global financial institutions come from financing the wider economy,” which includes the emissions generated by banks from heating their buildings to flying executives to meetings. However, the rise of ESG investments gives new impetus for financial institutions to prioritize net-zero goals. Still, it's up to investors to choose a greener future by “voting with their wallets”, says Hari Ram Kumar RS, global head of risk intelligence at Supply Wisdom. 

Rosalind Ng, global head of client experience and strategic business enablement at Standard Chartered Bank, states that “banks have to leverage the financial system to minimise the impact of global warming.” She adds that “focusing on any one specific area is not enough.” To do so, banks need to implement green measures in all facets of their operations.

Standard Chartered Bank’s various new partnerships encourage clients to sign up for green solutions. It has enrolled in a scheme with its manufacturing partner, Thales, to produce carbon-neutral credit and debit cards since November 2021. The carbon offset initiative saves 450 tonnes of CO2eq (carbon dioxide equivalent) per
year, equivalent to 15 million plastic bags.

Tatler Asia
Photo by Marek Piwnicki Unsplash
Above Photo by Marek Piwnicki Unsplash

There is also a partnership with green utility provider in Singapore, Geneco, to offer rebates to customers opting for renewable energy, as well as one with Swedish impact tech company, Doconomy. “We are introducing a digital tool to help clients track and manage their carbon and water footprint through credit and debit card spending.”

Meanwhile, HSBC is committing to a net-zero business by 2050. This ambitious plan is set to reduce financed emissions in retail accounts “through green financing solutions, from green bonds to deposits”, shares HSBC chief investment officer for SEA, James Cheo. With philanthropic programmes in place to donate US$100 million to scale climate innovation ventures, HSBC also supports CleanTech innovation companies within its technology venture debt fund.

Read more: How Can I Evaluate Sustainable Investments and Avoid Greenwashing?

ESG Equals Results

In addition to what actions banks are taking, it’s also up to investors to prioritize “deep profit to make money and real impact”, says author and EGN chairperson, Joanne Flinn. According to Standard and Poor’s (S&P) Global Market Intelligence analysis of 26 ESG-based exchange-traded funds found that 19 performed better than the S&P 500.

Those outperformers rose between 27.3% and 55% in the year between March 2020 and March 2021, compared to only 27.1% by S&P 500 funds. Deep profit becomes the meaningful incentive to build a financially viable and environmentally driven ESG portfolio.

 

Tatler Asia
Photo by Annie Spratt Unsplash
Above Photo by Annie Spratt Unsplash

Cheo shares how companies with a higher ESG ranking are able to ride through major crises more smoothly and report stronger profits, “around 18 per cent more than the companies at the bottom 10 per cent of the ESG scoreboard,” due to better management practices. While ESG-based funds currently represent about two per cent of global assets under management (AUM), they have generated US$2.3 trillion globally in the last 10 years.

By 2025, they are expected to exceed US$50 trillion, according to reports by the International Finance Corporation. Craig Cameron, portfolio manager of Templeton Global climate change fund, shares how investors from Asia have “quietly more than doubled sustainable investment asset growth more than any other region,” with steady growth throughout Europe, North America, and Australia.

Don't miss: Meet the Pioneering Female Team Leading a Family Office in Hong Kong

Transfer Of Power

Tatler Asia
Photo by Mika Baumeister
Above Photo by Mika Baumeister

HSBC’s Cheo shares how the next few decades will witness the largest generational wealth transfer in history. “An estimated US$30 trillion will go from baby boomers to millennials,” he says. “Since millennials filter through a sense of responsibility to concentrate on ESG investments, this moral obligation is the leverage needed for companies and policymakers to accelerate longer-term climate mitigation and adaptation policies.”

As investors move towards a low-carbon economy, this transition unveils the many financial upsides of thinking green. For starters, companies receive subsidies and tax rebates when opting for energy-efficient production and lifestyle choices. This further cements millennial investing behaviours and proves that the consequences of not thinking ‘planet first’ are more costly in the long run.

Businesses and investors who continue to deny sustainability are at risk of becoming obsolete, assesses Jessica Cheam, founder of Eco-Business. “There’s a cost to inaction,” she says. “There’s this concept called ‘stranded assets’—are you investing in infrastructure or an asset that will lose all of its value? Are you becoming irrelevant because you haven’t kept up with the times?”

What Should You Do As An Eco-Investor?

Cheo vouches for negative and positive screening to incorporate ESG into your portfolio. “The former excludes investing in sectors with negative externalities, while the latter identifies high-scoring companies on ESG factors relative to peer companies.” Positive ESG filtering often leads to outperformance, improved returns and reduced volatility overall.

Cameron advocates for investments in three types of ventures. “First, those that aid in reducing emissions; second, early adopters of new technologies and processes to reduce their carbon footprint; and third, those operating in low carbon-emitting sectors,” as a means to, directly and indirectly, reduce greenhouse gas emissions.

Moreover, to generate deep profit, Flinn states, “we must demand transparency, commitment, and accountability, along with clear-cut results from financial institutions.”

The pursuit of profit has a significant impact, and the costs are borne by the planet and its people. This is why we must take care when it comes to measuring profit, and not regard it as the sole aim. The financial custodians, meanwhile, must act as responsible enablers in driving the narrative forward. 

NOW READ

How to Make Our Sustainability Goals a Reality

This Sustainability Advocate Is Helping a Family Office Lead the Way in ESG

Ask the Expert: How Can I Build a Sustainable Investment Portfolio?

Topics