Commentary: COP28 raises questions about the future of Singapore’s fossil fuel-reliant industries

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DATA CENTRES, MARITIME AND AVIATION

Another area to keep an eye on is the information and communications technology (ICT) sector. Currently, the ICT industry is responsible for a relatively modest 8 per cent of electricity consumption in Singapore. However, ICT power use has quadrupled over the last 10 years.

According to consultancy Cushman and Wakefield, Singapore is now the largest data-centre market on a city basis in the Asia-Pacific outside China, with more than 40 data centres. Given the growth potential of this industry, it is important for data centres to adopt the latest smart cooling technologies. 

A further concern is maritime transport and aviation, business activities which Singapore is a hub for. The emissions associated with these sectors are generally not included in national estimates, because the fuels used are categorised as “international bunkers” and are not included in the Paris Agreement. This loophole has limited the pressure to address these sectors’ emissions until recently.

If the aviation industry fails to abate its emissions, it could consume more than a quarter of the world’s carbon budget for 1.5 degrees Celsius of warming by 2050. Although the aviation industry has recently agreed to reach net zero emissions by 2050, this is a voluntary agreement which risks being reneged upon if procuring enough sustainable aviation fuel or commercialising electric planes proves too challenging.  

A rigorous carbon accounting model would include all emissions attributable to Singaporeans’ air travel. It would also include the emissions due to shipping of goods they buy. Ideally, it would additionally account for the emissions due to the production of goods imported into the country.

While these indirect emissions are more challenging to estimate, they are crucial in getting the full picture of Singapore’s carbon footprint. It is time for individuals, companies and countries to take responsibility for their own actions and the environmental impacts they cause.

The transition away from fossil fuels is now official. The urgency of the climate crisis behoves all countries to take stock of and apportion responsibility for their emissions. The conclusion of COP28 is a chance for Singapore to review its climate strategy and decide where it should strengthen its efforts.

Roger Fouquet is Senior Research Fellow at Energy Studies Institute, National University of Singapore.

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Push to green data centres as they guzzle more power amid growing digital demands

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‘EVERY LITTLE BIT COUNTS’

The view is shared by companies such as Empyrion DC, a next-generation digital infrastructure platform headquartered in Singapore. 

Empyrion DC CEO Mark Fong said this involves thinking about sustainability holistically, “because every little bit counts”. 

The company has taken steps to cut down its carbon footprint, including regularly upgrading technology, properly managing e-waste and reducing water usage in the bathrooms. 

“The end goal is really to be able to tap off the grid clean energy,” said Mr Fong, adding that even starting with 10 per cent is a step in the right direction. 

Tech giant Google has been matching 100 per cent of its global annual electricity consumption with purchases of renewable energy since 2017. 

The company plans to operate its data centres around the world on carbon-free energy by 2030. 

“Obviously this is very challenging, even with… the most advanced renewable markets that we have now,” said Mr Ken Siah, head of Data Center Public Affairs (Asia Pacific) at Google. 

“The sun is not going to shine 24 hours a day. The wind is not going to blow 24 hours a day. So we have to really work with governments, energy producers, (and) renewable energy generators to make sure the grid is set up and properly equipped to make this transition.”

There is a need to encourage governments to tweak regulations, and invest in scores of renewable energy projects globally, said observers.

For Google, the transition also involves installing more efficient chips, using machine learning to slash power consumption, and even giving customers a chance to choose where in the world they want to run their cloud computing to meet their own sustainability goals.

“Customers are demanding it. Governments are demanding it. It is a business imperative that they have to become more sustainable,” said Mr Siah. 

“And I think a lot of companies recognise this, and I think that’s why you see there’s a greater push in the industry in general to have more sustainable data centres.”
 

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Indonesia thinks its nickel export ban is working

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Economists have long advised Indonesia to reduce its reliance on commodity exports and promote economic diversification. The Indonesian government has been pursuing this through the establishment of special economic zones and tax holidays. 

But in 2020, the Covid-19-induced recession led to a more draconian diversification approach with a ban on the export of all unprocessed nickel.

Using an export ban as an industrial policy instrument is controversial since it creates market distortions and its goals must be carefully stated and measured.

Nickel is an important material for the production of most rechargeable batteries and its significance in the global supply chain has increased dramatically with the pursuit of global net-zero ambitions. 

As Indonesia is the largest producer of nickel ores, President Joko Widodo (Jokowi) is sanguine about leveraging this advantage to increase the domestic value added from the nickel ore export ban.

Domestic value creation is cited as Jokowi’s primary goal. On paper, the results of the export ban are striking. Almost US$14 billion has been invested in nickel smelter capacity in Indonesia. 

Maluku Utara and Sulawesi Tengah, Indonesia’s nickel downstreaming provinces, experienced double-digit growth rates in 2021, driven primarily by investment in the industry. Jokowi has highlighted how the ban has seen a 30-fold increase in the value of Indonesia’s nickel-related exports.

Calculating domestic value added is not straightforward. Comparing nickel ore export values and their derivatives is misleading since downstream products also embody the cost of energy needed for production and other inputs.

President Joko Widodo (third left) during a visit to the PT Obsidian Stainless Steel (OSS) production line, during a series of events for the inauguration of the China-invested nickel smelter factory PT Gunbuster Nickel Industry (GNI) in Konawe, Southeast Sulawesi, in a file photo. Image: Twitter / Doc Palace / Agus Suparto

Because Indonesia was one of the largest nickel ore exporters, the ban has led to an increase in the international price of nickel and its derivatives. Investors in smelters now enjoy a much cheaper domestic price for nickel ore and a much higher value for exports of nickel metal. 

On top of the tax holidays and cheap energy, which are crucial for capital and energy-intensive extraction, smelters are effectively subsidized by the government.

One may justify a reduction of short-term efficiency for future gain. The ultimate aim of nickel downstreaming is to position Indonesia as a major producer of electric vehicles (EVs), and achieving this may warrant a short-term loss. But the details matter and the challenges are apparent.

Most of the nickel mined in Indonesia is more suitable for producing stainless steel than renewable batteries. General smelter incentives and the nickel export ban skew investment towards stainless steel production instead of EVs. 

The government has had to introduce measures to stop the growth of stainless steel production – including taxing exports of ferronickel – to support the development of smelters for battery production and processing facilities for high-pressure acid leaching.

The processing of nickel for use in EV batteries, however, comes with a significant environmental and carbon footprint. This is important if Indonesia wants to tap into the global market for EV products, particularly in Western markets. 

EVs and their components are generally still more expensive than conventional combustion engine vehicles, and the Indonesian market alone will not be large enough to build sufficient scale.

Accessing the EU and US markets is likely to be challenging. In addition to environmental concerns, both have their own industrial policies. The fact that the European Union took legal action against Indonesia over the nickel export ban and won with US support does not help.

The Chinese market, which is larger and growing faster, is a potential market for Indonesian EV production. But the highest-selling EVs in China use nickel-free batteries. Global nickel scarcity creates incentives for producers to reduce or even eliminate nickel content in their batteries through technological innovation.

The Indonesian government is considering reducing its EV import tax to encourage the adoption of EVs domestically. While this policy may help Indonesia’s domestic EV adoption goal, it runs counter to the aim of nickel downstreaming. 

Indonesian EV producers must compete with imported EVs, which may reduce the market share of domestically produced EVs even further and discourage investors from building an Indonesian EV industry.

By considering an import tax reduction for EVs, the Indonesian government implicitly acknowledges that building a domestic EV industry is at odds with its 2060 net-zero emissions goal. 

For now, a better bet may be to focus on electric scooters, which are easier to manufacture and more affordable to domestic consumers. By tapping into this market first, Indonesia could gradually expand its industry for larger EVs.

Trade policy remains key. If the Indonesian government thinks the European Union filing a case against Indonesia in the WTO is a form of “forced export”, it should navigate this diplomatically. If Indonesia wants to restrict its exports, it should not complain when the European Union imposes controls on its imports from Indonesia. 

The Indonesian government needs to understand the reciprocal nature of WTO membership if it wants to negotiate this matter with partners.

Indonesia has imposed a ban on raw nickel exports. Image: Facebook

Nickel is a small part of the whole EV value chain and building an EV industry requires much more than a ban on nickel exports. But Indonesia’s nickel downstreaming policy is here to stay. 

Firms already committed to investing in Indonesia under conditions set by the policy have an incentive to resist change to the status quo. The government has to consider the country’s reputation as an unpredictable investment destination if the resource-based downstreaming story is to be sold as one of Jokowi’s biggest achievements when he ends his second term in 2024.

Downstreaming will not get any easier for the next Indonesian president. Government funding will be constrained by the debts of past infrastructure projects and the construction of Indonesia’s new capital city. Global uncertainty and high-interest rates won’t help either. 

As renewable industries become more complex, factors like a predictable supply chain, proper law enforcement, market access, human resources and technology will become even more important. 

The Indonesian government has to address these issues to improve Indonesia’s business environment. Relying on export bans is no magical solution in framing Indonesia’s industrial policy.

Krisna Gupta is Lecturer at Politeknik APP Jakarta and an Associate Researcher at the Center for Indonesian Policy Studies.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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Why are leaders still flying to climate summits by private jet?

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At the most recent UN climate summit in Dubai, COP28, more than 70 000 members from nearly 200 nations include Raji Sunak, David Cameron, and King Charles. However, they are just a few of the thousands who will have flown that on their own. The British monarch, foreign secretary, and prime minister actually took three different planes to their destinations.

Around 315 private jet flights were made at COP27 in Egypt last season. This is a remarkable data, especially given that fewer earth leaders attended the COP because some were preoccupied with Bali’s G20 summit.

To calculate the carbon footprints of traveling to this year’s meeting, COP28 in Dubai, for various modes of transportation, including private jets, we assembled a group of scientific experts. In the end, we want to give participants the tools they need to choose climate-conscious go.

In order to discourage participants from using private jet unless absolutely necessary for safety, we furthermore compared the carbon footprints of the previous three Officers to help determine where the conferences might be held.

Although we do n’t yet have complete data, the use of private jets last year—and probably this year as well—indicates that this is becoming the new norm and has progressed beyond just the most important world leaders.

carbon footprints of various modes of transportation

According to pollution from burning jet energy and because mist routes help produce high-altitude clouds that trap more heat in the atmosphere, flying is already one of the most carbon-intensive modes of transportation. Additionally, decarbonization is particularly challenging because we cannot just use electric planes in their place.

Private jets are the worst of all in terms of pollution. &nbsp, Photo: Shutterstock / Dushlik

Personal jet travel is the most damaging function of all because it uses a lot of fuel while transporting some people. According to French scholar Thomas Piketty, if we are to combat climate change, we must address them because they serve as an illustration of school inequality.

Their usage by well-known individuals blatantly undermines the purpose of a climate conference and exemplifies the lack of commitment to sustainable practices as well as the disconnect between economic concerns and individual behavior.

This runs the risk of forming and influencing public opinion. According to earlier studies, people are less likely to get climate action seriously if they believe their leaders are failing to contribute.

Prior to the formal peer review, we looked at the use of private jets for the COP27 in Egypt ( our findings are available as a preprint ). The majority of private flights were short-haul, frequently lasting only an hour between the capital city of Cairo and the seminar location in Sharm El-Sheikh. As takeoff and landing consume more energy than cruising, planes are even less effective over shorter distances.

Therefore, avoiding small airlines and private aircraft is essential. In light of this, we looked into a variety of vacation choices for individuals from the UK, where we are based, to travel to COP28 in Dubai.

Even after taking into account a flight from Istanbul because you ca n’t travel the entire distance to Dubai by train or coach, private jet travel pollutes the area 11 times more than commercial aircraft, 35 times worse than train, and 52 times the amount of coach travel. For those traveling from the UK, this year’s pollutants may be higher due to the longer trip to Dubai than Egypt.

Transport from London to COP28 carbon intensity ( grams of CO2equivalent ):

Bar chart
The amount of aircraft pollution depends on the distance from London to Dubai. The emissions of cars, trains, and coaches are calculated based on trips from London to Istanbul and a subsequent trip. A Cessna 680 Citation Sovereign is used for private jet emissions ( most frequent in COP27 data ), an Airbus A380-300 for commercial flight emissions, and a Vauxhall Corsa for car trips. Roberts and colleagues ( 2023 ), CCBY-SA

The UNFCCC, the UN system that chooses where Criminal meetings will take place, may bear some of the blame for flight emissions. Conflict zones surround Dubai, making flying that necessary because they obstruct area pathways from Europe, Asia, and Africa.

While the majority of delegates will want to travel sustainably, their choices will depend on the availability of other modes of transportation, such as healthy land routes, and, for those traveling farther away, at the very least, the ability to fly directly to reduce their carbon emissions.

In this regard, Dubai is a wise choice because it has many direct flights and there is less need for following or internal flights due to its proximity to major airline hubs.

Our study emphasizes the necessity of properly weighing the effects of traveling to COP meetings on the carbon footprint. In the end, decision-makers may need to choose the spots of climate change conferences that will help reduce the carbon footprint of the attendees.

But, personal aircraft are still not advised. They have a much larger carbon footprint than other modes of transportation, worsen current weather agreements inequalities, and mislead the earth.

Professor Priti Parikh is Professor of Infrastructure Engineering and International Development at UCL, Carole Roberts is Researcher at Carbon Footprint of Transport, Mark Maslin teaches Natural Sciences there, and Prof.

Under a Creative Commons license, this post has been republished from The Conversation. read the article in its entirety.

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China, Russia to be significant participants in COP28

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This week Dubai welcomes COP28, an annual UN conference on combating global warming. The significance of the climate-change issue is underscored by the fact that this October marked the hottest month ever recorded in the history of meteorological observations, and scientists predict that the year 2023 may set a new historical temperature record.

COP28 is taking place amid escalating geopolitical conflicts worldwide and a slowdown in global economic growth, partly due to changes in the energy market. Nevertheless, even contentious political issues such as US and EU protectionism regarding green goods from China, such as solar panels and electric cars, or economic sanctions against Russia, are being set aside.

Climate transcends politics. Preventing an increase in the average global temperature by more than 1.5 degrees Celsius by 2050 is a global imperative achievable only through international cooperation and coordinated efforts by all countries.

Sultan Al Jaber, the president of COP28, has stated that one of the summit’s tasks will be a “global inventory” of progress in fulfilling the commitments, nationally determined contributions (NDCs), that countries have undertaken within the framework of the Paris Climate Agreement.

He also emphasized the importance of fulfilling a long-standing commitment by wealthy nations, which historically accounted for the majority of greenhouse gas emissions, to provide US$100 billion annually to support poorer countries in their efforts to combat climate change and transition to renewable energy sources.

This year, China will be one of the most active participants in COP28. Despite the challenges posed by its rapidly expanding industrial output, President Xi Jinping committed in 2020 to achieving net-zero emissions by 2060.

The country is making significant strides toward this goal. China has led the world in electric-vehicle production for eight consecutive years and boasts the highest installed capacity of solar and wind power plants globally, aiming to surpass 1.2 billion kilowatts by 2030.

China is also assisting 40 developing countries, particularly in Africa and small island states, in addressing climate-change effects and adopting green energy solutions based on Chinese photovoltaics (solar panels).

Russian involvement

Russia will also be a significant participant in COP28, with a high-level delegation and its own pavilion at the conference. In October, President Vladimir Putin signed the Climate Doctrine outlining a concrete action plan to achieve carbon neutrality by 2060.

Many Russian companies are already at the forefront of implementing climate programs. For instance, Rusal is the world’s leading producer of low-carbon aluminum, much of which is supplied to China.

The state corporation Rosatom plays a crucial role in Russia’s climate agenda, not only operating nuclear power plants, which account for 20% of Russian electricity supply, but also constructing nuclear power facilities in other countries, promoting decarbonization.

SIBUR, a leading Russian producer of polymers and rubber, is also actively pursuing a climate strategy. SIBUR is the first Russian company to receive carbon units through the implementation of climate projects, which it monetizes in both domestic and international markets. 

In September, it was it was reported that SIBUR was in discussions with Chinese firms regarding the sale of carbon units. By purchasing carbon units in Russia, Chinese companies interested in supplying eco-friendly products to global markets can reduce their carbon footprint. As environmental regulations tighten worldwide, the volume of such transactions is expected to increase.

Russia established a national register of carbon units last year and is gradually developing a carbon-unit trading system. Trading carbon units provides economic incentives for investment in modernizing production and transitioning to green technologies.

Russia is drawing inspiration from China, where the carbon-unit trading market was established in 2021 and has already become the world’s largest, with a total transaction volume exceeding 365 million tons of carbon dioxide. Moreover, the price range for carbon units in China, ranging from 50 to 70 yuan ($7 to $11) per ton of emissions, is lower than in Europe.

While national carbon markets are important, the fight against climate change must be waged on a global scale. Thus carbon markets in different countries should ultimately become interconnected.

Pilot cross-border trade agreements are crucial steps in this regard. To achieve this, international validation, mutual recognition of carbon units from different countries, and the use of blockchain platforms that enable secure and legally significant transactions are required.

Russia’s SIBUR is collaborating with Chinese partners and plans to negotiate one of the pilot cross-border carbon unit sales in the coming months.

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Biofuel factory aims to slash emissions

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PUBLISHED : 24 Nov 2023 at 04:00

Biofuel factory aims to slash emissions
Chaiwat Kovavisarach, group chief executive of Bangchak Corporation Plc, expects good business prospects for SAF sales due to concerns over carbon dioxide emitted by fossil-derived fuel used by aircraft. Somchai Poomlard

Thailand’s first factory to make sustainable aviation fuel (SAF) from used cooking oil will begin operating in early 2025.

The output from the factory — operated by energy conglomerate Bangchak Corporation Plc — aims to reduce carbon dioxide emissions in the aviation industry.

The SAF project is being pushed ahead as the Department of Airports and the International Air Transport Association (IATA) conduct a joint study on biofuel usage.

“We expect to install machines and necessary equipment at our SAF production facility soon,” Chaiwat Kovavisarach, group chief executive of Bangchak, told a forum “Regenerative Fuels: Sustainable Mobility,” held yesterday by the corporation.

SAF can replace jet fuel because their properties are similar, while the former has a smaller carbon footprint.

Bangchak’s oil refinery facility in Bangkok’s Phra Khanong district. The firm is building a sustainable aviation fuel production plant near the refinery. Bangchak Corporation.

This type of biofuel, which can be made from used cooking oil and agricultural waste, produces up to 80% less greenhouse gas emissions than conventional jet fuel, according to media reports citing various forecasts.

Mr Chaiwat said if SAF is used in the Thai aviation business, carbon dioxide emissions from the industry could be cut by 80,000 tonnes a year.

The 10-billion-baht SAF factory, with a proposed production capacity of 1 million litres a day, is being built near Bangchak’s oil refinery in Bangkok’s Phra Khanong district.

Mr Chaiwat said that after the company’s SAF project was unveiled, many companies had said they were eager to buy it.

He declined to name the companies, saying only they are in the aviation business and SAF purchase agreements are expected to be made in December.

The SAF business is one of Bangchak’s various environmental, social and governance projects, which are expected to help the company achieve carbon neutrality, a balance between carbon dioxide emissions and absorption, by 2030.

Bangchak also aims to use its SAF project to encourage the public to refrain from polluting the environment through improper disposal of used cooking oil or by repeatedly reusing it, which is harmful to their health, under a campaign “Fry to Fly”, or tod mai ting in Thai.

People can sell their used cooking oil at designated Bangchak petrol stations.

Mr Chaiwat expects a good business prospect for SAF sales, following growing concerns over carbon dioxide emitted by fossil-derived fuel used by aircraft. Bangchak Corporation

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Mranti aims to be Malaysia’s first carbon neutral innovation park by 2035 

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Hopes Malaysia can lead in ESG investments in the region
Malaysia targets increasing renewable energy capacity from 25% to 40% by 2035

The Malaysian Research Accelerator for Technology and Innovation (Mranti) announced its commitment to being the country’s first carbon-neutral innovation park by 2035. At the organisation’s flagship I-Nation conference, Chang Lih Kang, minister…Continue Reading

Indian fashion designers face eco-chic dilemma

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Indian model at Lakme Fashion WeekLakme Fashion Week
By Zoya Mateen
BBC News, Delhi

At last month’s Lakmé Fashion Week in India, conversations about making fashion more sustainable took centre-stage. But are the country’s designers ready for this?

The four-day event – organised jointly by beauty company Lakmé, billionaire Mukesh Ambani’s Reliance Brands and the Fashion Design Council of India (FDCI) – is one of Indian fashion’s biggest highlights.

While it had all the essential ingredients – glittering catwalks, clinking wine glasses and fashionistas in the front row – what grabbed eyeballs was a competition encouraging young designers to use eco-friendly materials to create outfits.

The event is part of a wider ambition among Indian designers aiming to make sustainability the driving factor of their businesses.

Many say they are trying to shrink their brands’ environmental footprint – some are completely shifting to reusable materials, experimenting with fabrics made from used carpet or agricultural waste and eco-prints of plants and flowers. But experts say a lot more needs to be done, given the magnitude of the challenge.

Lakme Fashion Week

Lakme Fashion Week

India’s fashion industry is expected to grow at a staggering rate to reach $115-125bn by 2025, making it an important player on the global stage. Like elsewhere, it’s the fast fashion market which is blamed for incurring maximum damage but experts say some of the responsibility also lies with the luxury segment.

More so since this segment has been growing rapidly in recent years, propelled by an emerging crop of young Indians with higher disposable incomes.

“Big designers have fashion shows every year and new collections every season, which means they too are creating clothes at a constant pace,” says Pooja Singh, fashion and luxury editor at Mint Lounge newspaper.

So increasingly, the industry is facing repeated allegations of hypocrisy – of causing too much damage and doing very little to combat it. Critics say Indian designers sometimes use terms such as sustainability and eco-friendly for marketing campaigns without actually practising what they preach. Some designers reject the accusation, but other industry insiders agree it is a serious challenge.

Jaspreet Chandok, group vice-president of Reliance Brands which has invested heavily in the luxury market in recent years, says there’s no simple answer to how luxury fashion can tackle climate change because everything is “work in progress”.

“But what we do bring to the table are innovative materials and technologies to bridge the gap between luxury and sustainability,” he says.

An Anita Dogre store

Getty Images

Implementing these changes, he says, will take time, and the solution cannot be to ask people to stop making or buying new things. “After all, the industry allows people to express themselves and brings so much joy. It also provides employment to millions of workers.”

While sustainability is often seen as only related to the environment, in the Indian context, it should also include improving the working conditions of artisans who form the backbone of the fashion market. Some of the biggest names on the runways of Paris and Milan quietly rely on these highly-skilled workers to produce their fabulous hand-made outfits and India is one of the largest exporters of garments and textiles at $44.4bn.

But there have been allegations that they work in exploitative conditions, a trend which critics say has continued under Indian labels. In 2020, The New York Times reported that one of India’s best-known designers was facing legal action from workers over unpaid wages.

Mr Chandok, however, says that a lot has been done to tackle the problem and workers are receiving better pay and opportunities. But labour unions have said that there is still a long way to go before fair working conditions are achieved.

Ms Singh says that making fashion sustainable is a complicated process and there are no straight answers for the best way to achieve it. “The simple solution would be to produce less but in the end, it’s a business with jobs of millions tied into it.”

In this picture taken on January 7, 2023, an embroider of Shanagar, a luxury Mumbai-based hand-embroidery atelier, works on a design at their production facility in Mumbai. -

Getty Images

Using eco-friendly clothing is also not a silver-bullet solution. Fabrics like recycled polyester and those made from wood pulp have a lower carbon footprint, but they too have an environmental cost as their production could lead to deforestation, Ms Singh says.

The onus, she says, also lies on consumers to make mindful choices.

Things have changed a little after the Covid-19 pandemic with more people becoming mindful of protecting the environment and making sustainable choices, including when it comes to fashion.

The industry has already started responding to this changing trend – FDCI chairperson Sunil Sethi says many designers are choosing to focus on one collection a year instead of seasonal ones. Even celebrities are embracing the idea of pre-loved clothing and repeating outfits.

The process is slow but, he says, every step is a way forward.

Mr Sethi says that designers have also found new ways of defining luxury, where the focus is not on creating more but less.

He calls it “slow luxury”, or garments that are crafted by hand, slowly and methodically, to create ensembles that outlive seasonal trends, almost like an heirloom that can be handed down from one generation to another.

That’s exactly the sort of fashion that renowned Indian designers Abraham and Thakore are known for.

Called the “quiet revolutionaries” of the fashion world, the designers are credited with reinventing Indian couture by experimenting with eco-friendly fabrics, while staying rooted in traditional textiles and crafts.

“It’s simple – short-term trend is just not the solution to anything,” Mr Thakore told the BBC.

“When you create something unique and signature, it automatically becomes non-disposable. And it’s not just fashion, it applies to everything.”

BBC News India is now on YouTube. Click here to subscribe and watch our documentaries, explainers and features.

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Impact investing on the rise: BNP Paribas survey | FinanceAsia

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Impact investing is gaining in popularity across the globe, but a lack of harmonised environmental, social and governance (ESG) data, regulations and standards pose barriers to its development in Asia, a BNP Paribas survey suggested.

“Asia Pacific (Apac) is behind Europe, which has already integrated broader ESG topics such as inequalities and biodiversity. But it is ahead of North America which is highly fragmented over this topic,” Jules Bottlaender, Apac head of sustainable finance at BNP Paribas (securities services), told FinanceAsia.

So far 41% of global investors recognise a net zero commitment as their priority, while in Apac, 43% have set a due date to achieve net zero targets, according to the survey.

The global survey, titled Institutional investors’ progress on the path to sustainability, looked into how institutional investors across the globe are integrating their ESG commitments into implementation.

It gathered data from 420 global hedge funds, private capital firms, asset owners and asset managers between April and July 2023. Among them, 120 (28.6%) are from Asia Pacific (Apac) markets including China, Hong Kong, Singapore and Australia.

Impact investing

Impact investing, a strategy investing in companies, organisations and funds generating social and environmental benefits, in addition to financial returns, is a global trend that in the next few years, is set to overtake ESG integration as the most popular ESG strategy, the report revealed.

Globally, ESG integration dominates 70% of investors’ ESG investment strategies, but the proportion is expected to drop by 18% to 52% over the next two years. In contrast, 54% of respondents reported a plan to incorporate impact investing as their primary strategy by that time.

European investors have the greatest momentum in adopting impact investing at present, with 52% employing impact investing. While in the four markets in Apac, the proportion stood at 38%.

Negative screening took a lead as a major strategy of 62% investors surveyed in Apac. In the next two years, the figure is set to shrink to 47%, overtaken by 58% estimating to commit to impact investing.

“Impact investing is a rather new concept for most people [in Asia]. It is driven by the need to have a clear and tangible positive impact,” Bottlaender said.

An analysis from Invesco in March 2023 pointed out that while impact assessment is key to a measurable outcome of such investments, clear and consistent frameworks are required to avoid greenwashing acts.

“There is no singular standard for impact assessment,” the article noted. On the regulatory side, specific labelling or disclosure requirements dedicated to impact investing have yet to come in Asia.

Private markets, including private debt, private equity and real assets, will take up a more sizeable share of impact investing assets under management (AUM), it added.

Bottlaender echoed this view, saying that current regulatory pressure in Asia “is almost all about climate”. As a result, Asian investors’ ESG commitments are mostly around climate issues such as including net zero pledges and coal divestment. These are coming before stronger taxonomies and broader ESG regulations which are set to be finalised over the next few years.

Data shortage

A lack of ESG data is one of the greatest barriers to investors’ commitments, as respondents to the survey reported challenges from inconsistent and incomplete data. The concern is shared by 73% of respondents across Apac, slightly higher than a global average of 71%.

Bottlaender explained that although mandatory reporting of climate data is adopted in certain regulations, a majority of ESG data is submitted voluntarily.

This leads to a fragmentation and inconsistency of sources based on the various reporting standards they adhere to. Moreover, the absence of third-party verification results weighs on the accuracy and reliability of the data provided, he continued.

He shared that investors are either engaging directly with companies to encourage standardised reporting practices, or relying on data providers, or leveraging technology to carry out quality control to address the lack of ESG data.

But “significant gaps persist, especially concerning private companies and aspects like scope 3 emissions.”

“As a result, investors must be extremely cautious when advancing any ESG claim or commitment,” he warned.

¬ Haymarket Media Limited. All rights reserved.

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Impact investing on the rise: BNP survey | FinanceAsia

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In: Asia, Finance, South-East Asia

Impact investing is gaining in popularity across the globe, but a lack of harmonised environmental, social and governance (ESG) data, regulations and standards pose barriers to its development in Asia, a BNP Paribas survey suggested.

“Asia Pacific (Apac) is behind Europe, which has already integrated broader ESG topics such as inequalities and biodiversity. But it is ahead of North America which is highly fragmented over this topic,” Jules Bottlaender, Apac head of sustainable finance at BNP Paribas, told FinanceAsia.

So far 41% of global investors recognise a net zero commitment as their priority, while in Apac, 43% have set a due date to achieve net zero targets, according to the survey.

The global survey, titled Institutional investors’ progress on the path to sustainability, looked into how institutional investors across the globe are integrating their ESG commitments into implementation.

It gathered data from 420 global hedge funds, private capital firms, asset owners and asset managers between April and July 2023. Among them, 120 (28.6%) are from Asia Pacific (Apac) markets including China, Hong Kong, Singapore and Australia.

Impact investing

Impact investing, a strategy investing in companies, organisations and funds generating social and environmental benefits, in addition to financial returns, is a global trend that in the next few years, is set to overtake ESG integration as the most popular ESG strategy, the report revealed.

Globally, ESG integration dominates 70% of investors’ ESG investment strategies, but the proportion is expected to drop by 18% to 52% over the next two years. In contrast, 54% of respondents reported a plan to incorporate impact investing as their primary strategy by that time.

European investors have the greatest momentum in adopting impact investing at present, with 52% employing impact investing. While in the four markets in Apac, the proportion stood at 38%.

Negative screening took a lead as a major strategy of 62% investors surveyed in Apac. In the next two years, the figure is set to shrink to 47%, overtaken by 58% estimating to commit to impact investing.

“Impact investing is a rather new concept for most people [in Asia]. It is driven by the need to have a clear and tangible positive impact,” Bottlaender said.

An analysis from Invesco in March 2023 pointed out that while impact assessment is key to a measurable outcome of such investments, clear and consistent frameworks are required to avoid greenwashing acts.

“There is no singular standard for impact assessment,” the article noted. On the regulatory side, specific labelling or disclosure requirements dedicated to impact investing have yet to come in Asia.

Private markets, including private debt, private equity and real assets, will take up more sizeable share of impact investing asset under management (AUM), it added.

Bottlaender echoed this view, saying that current regulatory pressure in Asia “is almost all about climate”. As a result, Asian investors’ ESG commitments are mostly around climate issues such as including net zero pledges and coal divestment, before stronger taxonomies and broader ESG regulations which are set to be finalised over the next few years.

Data shortage

A lack of ESG data is one of the greatest barriers to investors’ commitments, as respondents to the survey reported challenges from inconsistent and incomplete data. The concern is shared by 73% of respondents across Apac, slightly higher than a global average of 71%.

Bottlaender explained that although mandatory reporting of climate data is adopted in certain regulations, a majority of ESG data is submitted voluntarily.

This leads to a fragmentation and inconsistency of sources based on the various reporting standards they adhere to. Moreover, the absence of third-party verification results weighs on the accuracy and reliability of the data provided, he continued.

He shared that investors are either engaging directly with companies to encourage standardised reporting practices, or relying on data providers, or leveraging technology to carry out quality control to address the lack of ESG data.

But “significant gaps persist, especially concerning private companies and aspects like scope 3 emissions.”

“As a result, investors must be extremely cautious when advancing any ESG claim or commitment,” he warned.

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