By Adrian Pang
The raging COVID-19 pandemic that has gripped the world like a whirlwind, and social upheavals that have morphed into different beasts in different countries across the world have truly elevated the prominence of the “S” in ESG in a tumultuous 2020.
It is undeniable that these two events will fundamentally change how societies and the world organises and works. Social consciousness on public health and diversity have reached new heights. Even so, the pandemic and global economic fallout have slightly shifted primary discourses away from climate actions and environmental responsibilities – from momentum to transition to green economies and sustainable business models, to now focus on economic survival and resilience. In the short term, there are expected reductions of resources and budgets for sustainability due to economic fallout from the pandemic. But short-term economic recovery plans are insufficient to building long-term business resilience to face considerable climate risk.
Institutions need to create more socioeconomically and environmentally responsible strategies that address systemic changes required to transition to a low zero carbon global economy simultaneously with issues of human rights, racial, income and gender inequality, and overall health and wellbeing. Sustainable/Green Finance can be a substantial driver to lead a post pandemic world that values the wellbeing and survivability of the environment and society.
What is Sustainable/Green Finance
While there is not a formalised definition, green financing is generally perceived as financial flows (from banking, micro-credit, insurance, and investment) prioritising ESG risks and opportunities while still ensuring decent, if not positive rate of return. Green financing values social and environmental factors, impacts and sustainability.  It also brings accountability in business and financial decisions and strategies for the future. As the global economy reels from the pandemic, green financing is making significant headway into economic recovery plans. Entities in the public, private and not-for-profit sectors are encompassing this financial paradigm shift into their business continuity plans and economic resilience strategies.
Green Finance in Post-COVID 19 World
The COVID-19 crisis is seen as a rude awakening and a major stress test for the world’s social and financial systems to prepare for the long-term climate crisis. It is understandable that financial interventions and stimulus packages by countries need to address short-term health and economic weaknesses. However, governments should also strive to reshape ecosystems, investments, and production and consumption patterns through green financing to realise a resilient, and sustainable recovery as well as future.  The Financial Times argues that cost of climate inaction would amount to a staggering $600 trillion by 2100. This is inevitable at the current trajectory, as the world will not see its carbon emissions halved by 2030 as set out by the Paris Agreement. 2030 is also the expected year of climate tipping point – the point of no return for the climate crisis. Therefore, drastic measures like Green Finance are required now to make systemic changes in the post pandemic world.
The World Bank has recently published a guide for financial regulators in emerging economies to scale up green finance in their countries.  The guide can help financial institutions to structure and refine green finance products (e.g. loans, credits, and guarantees) as well as encourage investors to invest in impact investments opportunities that comply with sustainability criterions. The European Union is pushing for a Green Deal for economic recoveries post pandemic. The regional bloc has set up a new “Green Recovery Alliance” that brings together politicians, CEOs, NGOs, think tanks and subject matter experts across the continent to identify and drive green finance and investments. Elsewhere, the slogan “Build Back Better” is increasingly a catchphrase for many governments to tailor their economic recovery strategies to incorporate low-carbon and clean economic developments. Hong Kong and China have implemented mandatory ESG disclosure for companies while French bank Natixis voluntarily incorporated climate risk into its credit decision-making process.  South Korea has also pledged to a “Green New Deal” as it recovers from the COVID-19 induced economic losses.  Overall, there are encouraging signs that countries are embarking on the green path to economic recoveries.
Moving Forward and Organisations’ Roles
The conundrum between prioritising economic recovery or climate action remains needlessly real. Indeed, countries in Asia, of which many are emerging economies remain reliant on restoring traditional economic and financial fundamentals (which are often carbon intensive) to reboot their economies.  This is counterproductive to global progress made on the sustainability front.
2020 is on course to record the largest drop of GHG emissions, estimated at 8% year on year.  However, this reduction is due to enforced lockdowns and decreased traffic volumes globally and it is likely to be an one-off anomaly post-pandemic. The world needs to achieve at least 7.6% reduction annually between 2020 to 2030 to keep global temperature increase to less than 1.5 degree Celsius by the end of the century.
The bottom line remains, we need to protect the Earth now more than ever. The pandemic is a good reset for how things work. In fact, the world is ready for a paradigm shift on green finance where climate and sustainability elements can closely entwine with economic recovery and development.
Companies and organisations also have significant roles and responsibilities in realising more sustainable development and popularising green finance post COVID-19. Some possible actions are: working with governments to stimulate green recoveries, supercharging corporate resilience and prioritising climate risks, bailouts or financial tools with sustainability strings attached, enhancing ESG performance and disclosure, altering business models and practices, and identifying sustainable values in business deals and developments. All these potential strategies can involve and abide by values of green financing. We have seen a strong push for the big “S” in 2020, let us also push for the big “E” and “G”.
Reach out to us to find more about how you can enhance your sustainability/ESG strategies and performances as well as how green financing could work for your organisation or business.