Recognizing the varying volumes and capacities of our members in light of green investments, the GIP Secretariat has always placed capacity building at the core of our work. In 2019, three working groups were established at the First Plenary Meeting, with a vision to develop tools and methodologies on key topics, and foster knowledge exchange within the community.
Despite the disturbance of the COVID-19 pandemic, many financial players have maintained their commitment to sustainability. In a time when peer-learning and encouragement are increasingly important, the GIP Secretariat launched the capacity-building webinar series in June for the year 2020, as previously planned, with great contribution from the Working Group leaders, aiming to share thoughts, expertise, and leading practices among members.
So far, the two webinars held have attracted over 100 representatives from almost all GIP members tuning in from Asia, Europe, and Africa, and we look forward to your continuous participation in our future events.
Webinar Highlights:
The Webinar on ESG Disclosure was co-hosted by Crédit Agricole CIB, Industrial Bank of China, and Ernst & Young, on June 23. The webinar touched upon regulations and leading practices of ESG disclosure, with two cases from working group leaders, while bringing up suggestions for GIP members to further improve in this regard.
As introduced by Judy Li, Partner from the Climate Change & Sustainability Services Dept. at EY, ESG disclosure is required by an increasing number of stock exchanges worldwide, with a “comply or explain” mechanism and guidelines issued to formalize the content and format of disclosure. On the other hand, ESG factors are also increasingly taken into pre-investment decision-making within financial institutions.
The main point of establishing an ESG management system is to engage the decision-makers (the board of directors) to pay attention to sustainable development and ESG issues. In the case of China Industrial Bank presented by Quan CHEN, Senior Manager from the Green Finance Department, the regulatory requirement released by the CSRC in 2014 has been a major push in getting the Board of Directors to agree to disclose ESG information, especially the environmental performance of their businesses. The management structure should be top-down: from the decision-making level, to senior management and departments, and ultimately to the working level for execution.
Once the management policy and structure are in place, more granularity is needed in frameworks, standards, and indicators, as well as the formalization of the data collection process. In the Case of CACIB presented by Dominique Duval, Head of Sustainable Banking APAC and Carmen Tsang, Vice President of Sustainable Banking, its ESG criteria is evolving over the past years, to include the CSR performance of clients, as well as climate and environmental risks. Based on all the data collected, it utilizes its customized methodology to assess the materiality of climate risks, aligning with the TCFD recommendation.
The webinar concluded that developing ESG disclosure is going to be a long journey and there are still challenges regarding data availability and institutional capacity. The WG2 is dedicated to helping all GIP members to improve transparency in this regard and welcomes suggestions from members on how it can better assist.
The Webinar on Innovative Green Financial Instruments was hosted by Bank of China, with the support from Standard Chartered, AIIB, EBRD, Credit Agricole CIB and Lianhe Equator, on July 16. The webinar centered on how different types of market players (public and private financial institutions, as well as third-party verifiers) have played a role in facilitating the innovation of green financial products.
The past years have seen the great momentum of green and sustainability bond issuance around the world. Financial institutions like the Bank of China and Standard Chartered have been active players in this field, keeping a high level of issuance annually while innovating bonds that serve very specific climate and environmental purposes, such as green transition.
With the globalization of RMB, the opening up of the Chinese capital markets, and the rapid evolvement of the BRI, panda bonds may provide new opportunities for global institutions looking to invest in green projects in the BRI region, as panda bonds help to diversify financing channels for bond issuers and manage financing costs for those with a need of cash and assets denominated in RMB.
Domenico Nardelli, Treasurer of the Asian Infrastructure Investment Bank, commented that there are two dynamics behind the growth of panda bonds: one is the improvement of market infrastructure, such as the “Bond Connect”, and the other is the relatively high interest rates of government bonds in China, comparing to other large economies.
The international development institutions, such as the AIIB and EBRD, play a more comprehensive role in scaling up green finance in emerging economies. On one hand, they engage and assist local authorities in assessing the challenges and making new policies; On the other hand, they are usually the anchor investor in many green projects. The issuance of a few green bonds in some emerging economies have not only supported green sectors, but also prompted the discussion on setting up national green taxonomies and policy incentives.
Experts from Lianhe Equator, a third-party verifier in China, also pointed out that the consistency between the EU taxonomy and the Chinese green bond taxonomy can imply great opportunities for cross-border green capital flows and investments. These two taxonomies share similar environmental goals and categories, and have left out the usage of coal, though the difference lies in the technical standards under different country circumstances.
The speakers agreed that it is essential to align new green financial products with the UN SDGs, while paying attention to the risks associated with new asset categories. Active participation to this webinar also indicated that this is one of the most popular topics among GIP members.