Page 7 - AsiaElec Week 41 2022

AsiaElec COMMENTARY AsiaElec

how green they are. This can affect the appetite investment.
of fund managers to invest if there is confusion “Sustainable Fitch has highlighted the impor-
and doubt over what is green, or social or gov- tance of the social impact of issuers’ business
ernmental, and what is not. activities and how that should contribute to
Sustainable Fitch’s report said that more higher ESG Entity Ratings. This means that for
transparent and useful information was needed two peers with similar environmental and gov-
by investors to address growing scrutiny of cor- ernance profiles, any activities serving social
porate activity and behaviour, regulatory and needs should lead to overall differentiation,” the
compliance requirements, and concerns about report said.
greenwashing. As green bond regulation slowly evolves, it
A second major issue to be address is the is likely to play a key role in decarbonising the
move to a commonly accepted set of ESG stand- economy and enabling governments to meet
ards, and how to measure progress. their net-zero targets by 2050, while at the
However, in practice investment firms will same time setting the rules that will prevent
find it difficult to manage and report data when greenwashing.
there are a large number of against different Green think-tank E3G said that found that
principles, taxonomies, reporting requirements, sustainable finance regulation would play a cen-
commitments and policies. tral role in the decarbonisation of the economy
This only leads to confusion for invest- and the reduction of emissions.
ment professionals and investors, and will only The paper warned that in the global economy,
hold back the expansion of the ESG sector the creation of international standards for sus-
and also make it easier to make accusations of tainable finance could become a contested bat-
greenwashing. tle, one where European, American and Chinese
Finally, the report warned that the S of ESG interests may create frictions.
was proving to be most difficult to promote, with With taxonomy systems, strict disclosure rule
bonds covering social impact worth far less than enforced by government or exchanges, or a mix-
environmental and green bonds. ture of the two available, ESG financing is still in
However, that could change, and the report a state of flux as new rules emerge and investors
warned that social concerns will become seek reliable benchmarks against which to make
more important for investors as they assess an their decision.™

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