TRANSFORM 2024: Why improve our reporting transparency if we are not actually reducing our impact? Five industry experts in the Transform 2024 panel on sustainable finance help answer this question.
In an era where sustainability is no longer a choice but a necessity, businesses and financial institutions are grappling with the complexities of integrating environmental, social, and governance considerations into their operations and reporting.
The discussion on sustainable finance shed light on the challenges and opportunities in this dynamic field, featuring insights from industry leaders such as Jo Scotney, general manager of institutional property and health at ANZ; Paolo Bevilacqua, group head of sustainability at Frasers Property; Nicole Yazbek-Martin, head of taxonomy and natural capital at the Australian Sustainable Finance Institute; and Chris Pyke, chief innovation officer at the GRESB USA benchmark.
To break down this multifaceted problem, it helps to start with the regulatory landscape in Australia and New Zealand. Jo Scotney emphasised the critical role of mandatory reporting in Australia, stating: “It is there to bring everyone up to a baseline.”
However, she also recognised that this was not the main issue moving forward. “Most of us have been doing it for a long time,” she added.” She also noted the everchanging standards: “What was good five years ago is not anymore,” recognising that it is easy for corporations to lag in sustainability efforts.
Paolo Bevilacqua provided an insight into Australia’s rival markets, where regulatory and reporting requirements vary dramatically.
In markets in Southeast Asia, notably Vietnam, Thailand, and Singapore, “If you say comply or explain, they’ll just comply,” he said, indicating a passive approach to sustainability that many would see as helpful to obtain results.
Bevilacqua stressed the need to consolidate more than 600 ESG (environmental, social and governance) frameworks and standards into a more coherent system. However, efforts were not lost. He said the consolidation efforts were like a “soup…turning into a nice hearty and thick stew.”
The tried and tested method for transitioning from frameworks to impact is taxonomy.
Nicole Yazbek-Martin highlighted the Australian Sustainable Finance Institute’s goal to get capital flowing towards sustainable initiatives. She underscored the importance of sustainable finance in realising the indirect pricing of risks and allocating capital toward new activities in partnership with the Australian government. Essentially, she envisions a future where carbon pricing exists on balance sheets as a common risk management procedure adopted by all industries.
Some governments have implemented taxonomies better than others, but GRESB’s Chris Pyke, challenged the notion that Europe is ahead in sustainability standards. “I will definitely reject the premise that our European colleagues somehow have this cornered.”
He emphasised the need for localised solutions and pointed to Mexico and Chile as examples of countries doing their taxonomies right.
Pyke compared varying government efforts to the carrot and the stick, describing Australia and New York real estate markets, respectively.
Regardless of the incentive structure, each panellist agreed on the importance of embedding sustainability reporting into corporate strategies but also noted how difficult this was.
Bevilacqua highlighted the challenge of integrating sustainability upstream into the value chain, while Scotney mentioned that while sustainability focus is at the board level and that all reporting goes through KPMG for ANZ, this is not true for many competitors. Pyke raised concerns about the narrow focus on carbon by some investors, potentially neglecting other important aspects like social and governance issues.
The panellists made it clear that financial institutions must spearhead these initiatives.
“We have made it a lot about the act of reporting,” Pyke said. But this is not the biggest issue anymore. “It’s a demand side problem.”
Pyke believes the information is out there, but that investment banks don’t ask for the information. “We are trying to influence the behavior of a relatively small number of investors.” High-impact investors, nonetheless.