SGX,NUS,KPMG Singapore study shows ESG important in key financial institutions’ asset allocation, lending & underwriting

KPMG SG joint study: ESG in Financial Services

SGX-NUS-KPMG study: Singapore financial institutions value ESG performance in financing

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  • Escalating stakeholder expectations, government and tax incentives are top drivers pushing the sustainability agenda in the financial services sector

Financial institutions (FIs) in Singapore place significant importance on Environmental, Social and Governance (ESG) performance, with a heavy focus on climate considerations. Majority of them said they evaluate clients’ sustainability disclosures, especially in the environmental factors of energy, water, waste and effluents, as part of their decision-making process. This is among findings from a joint study by Singapore Exchange Regulation (SGX RegCo), the National University of Singapore (NUS) Business School’s Centre for Governance and Sustainability (CGS) and KPMG in Singapore on “Perspectives of Financial institutions on Sustainability Disclosures”.

FIs interviewed said the motivation for greater emphasis on clients’ sustainability reporting stemmed from rising stakeholder expectations especially from investors and regulators, increased government and tax incentives, the regulatory framework and Singapore’s sustainable business-friendly environment1. All of the FIs interviewed said they are evolving their processes to fully integrate sustainability into their investment strategy by 2030, in recognition of the critical role they play in moving the sustainability agenda through their allocation of capital. This includes the importance placed on governance of sustainability, such as their Boards having oversight on sustainability-related matters in their organisations. Almost all of these FIs also evaluate and monitor non-financial risks.

Participants in the study wanted the current quality and quantity of ESG disclosures to be strengthened, with consistency across and within industries for easy comparison. In particular, FIs interviewed also highlighted the need for capacity building, recommending that corporates and FIs deepen their understanding and disclosures of climate-related risks and opportunities.

Participants were members of the Green Finance Industry Taskforce. Findings from the study were gathered via a survey and focus group discussions2.

The study also suggested that governments and regulators could facilitate better disclosures, including providing guidance on the right kind of data to report, as well as providing capacity building support on top of financial incentives.

“This study is important in shaping the work-plan for SGX RegCo as our listed companies become more accustomed to sustainability reporting. We see our role as guiding the distillation of key information so that challenges in ESG reporting – namely, quantification, comparability and harmonisation - can be addressed. Our next step will be to review how companies are doing on the sustainability reporting front three years since it was mandated. We intend thereafter to enhance our sustainability reporting rules to help listed companies better address increasing and more immediate interest around climate-related information,” said Tan Boon Gin, CEO of SGX RegCo.

Associate Professor Lawrence Loh, Director, Centre for Governance and Sustainability at NUS Business School, said, “Financial institutions are the vanguards in moving the entire business ecosystem. This report is a pre-cursor for the Singapore Green Plan 2030, particularly the Green Economy pillar. In disclosing ESG aspects, listed companies need to emphasise capacity building at the company level, including improving systems and structure, as well as capability development at the professional level, including honing skills and mindsets.”

“Connecting Environmental, Social and Governance (ESG) data points with financial information can provide unexpectedly powerful insights into the current state of an organisation, while challenging us to ask hard questions of its future state. The study validates that financial institutions in Singapore are using ESG indicators as proxies to assess credit worthiness and determine asset value. Corporates should capitalise on this, prioritising the need to build internal capabilities and working with advisors where apt, to drive deeper sustainability agendas that can position themselves strategically for growth. Reporting efforts should be aimed at building trust and credibility, holding up well against SGX’s guidelines and global standards, industry best practices, and in alignment with the expectations of stakeholders,” said Cherine Fok, Director, Sustainability Services and KPMG Impact, at KPMG in Singapore.

The full report on the study is here.

1 Rising stakeholder expectations (92.9%), government and tax incentives (78.6%), regulatory framework (64.3%) and sustainable business-friendly ecosystem (64.3%).

2 As part of this qualitative study, 14 key financial institutions in Singapore were surveyed, while 52 senior representatives participated in focus group discussions. Participants include banks, asset managers, institutional investors and insurers.

About Centre for Governance and Sustainability

The Centre for Governance and Sustainability (formerly known as Centre for Governance, Institutions and Organisations (CGIO)) was established by the National University of Singapore (NUS) Business School to spearhead relevant and high-impact research on governance and sustainability issues that are pertinent to Asia. This includes corporate governance and corporate sustainability, governance of family firms, government-linked companies, business groups and institutions. CGS also organises events such as public lectures, industry roundtables and academic conferences on topics related to Governance and sustainability.

More information about CGS can be accessed at https://bschool.nus.edu.sg/cgs/.

NUS Business School is known for providing management thought leadership from an Asian perspective, enabling its student and corporate partners to leverage global knowledge and Asian insights.

The School is one of the 17 faculties and schools at NUS. A leading global university centered in Asia, NUS is Singapore’s flagship university which offers a global approach to education, research and entrepreneurship, with a focus on Asian perspectives and expertise. Its transformative education includes a broad-based curriculum underscored by multi-disciplinary courses and cross-faculty enrichment. Over 40,000 students from 100 countries enrich the community with their diverse social and cultural perspectives.

About KPMG in Singapore

KPMG in Singapore is part of a global network of independent professional services firms providing Audit, Tax and Advisory services. We operate in 146 countries and territories and in FY20 had close to 227,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

For more information, visit kpmg.com.sg.

About Singapore Exchange

Singapore Exchange is Asia’s leading and trusted market infrastructure, operating equity, fixed income and derivatives markets to the highest regulatory standards. It also operates Asia’s only multi-partner, multi-asset exchange-led sustainability platform (sgx.com/first).

As Asia’s most international, multi-asset exchange, SGX provides listing, trading, clearing, settlement, depository and data services, with about 40% of listed companies and over 80% of listed bonds originating outside of Singapore. SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN and offers commodities and currency derivatives products. Headquartered in AAA-rated Singapore, SGX is globally recognised for its risk management and clearing capabilities. For more information, please visit www.sgx.com.

Media Contacts

Asha Raghu
Marketing & Communications
KPMG in Singapore
+65 8148 0997
asharaghu@kpmg.com.sg

Ang Hui Min
Corporate Communications Office
National University of Singapore Business School
+65 6601 5857
huimin19@nus.edu.sg

Carolyn Lim
Marketing & Communications
Singapore Exchange
+65 6236 8139
Carolyn.lim@sgx.com

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