Path to net zero : capturing opportunities across ASEAN

The impact of COVID-19 has reinforced the importance of sustainability in economic growth and energised the movement toward net zero emissions. HSBC recently hosted a webinar featuring expert speakers from across ASEAN to discuss the challenges and opportunities facing regional businesses as they transition to become more sustainable.

22 April 2021

Speakers

• Joseph Incalcaterra, Chief ASEAN Economist, HSBC
• Jonathan Drew, Managing Director, ESG Solutions, Global Banking, HSBC Asia-Pacific
• Dr. Darian McBain, Global Director, Corporate Affairs and Sustainability, Thai Union
• June Cheryl A. Cabal-Revilla, Chief Financial Officer and Chief Sustainability Officer, Metro Pacific Investments Corporation
• Mr. Nguyen Ngoc Thai Binh, Deputy CEO cum Chief Financial Officer, REE Corporation
• [Moderator] David Harrity, Regional Head of International Markets, Commercial Banking, HSBC Asia-Pacific

In ASEAN, as in markets around the world, the push for sustainable business practices has been gaining momentum in recent years. COVID-19 has only served to reinforce its importance, with many seeing sustainability as key to the global recovery and Asia playing a leading role in this effort.

The challenges facing ASEAN

Joseph Incalcaterra, Chief ASEAN Economist, HSBC, opened the webinar with a presentation on the economics of sustainability and the risks of climate change for the ASEAN region.

For nations in the region, climate change poses a number of risks. Of the top ten cities most vulnerable to rising sea levels globally, four are in ASEAN. Joseph discussed how mitigating the impact will require significant spending increases in cities like Bangkok and Ho Chi Minh City. According to some studies, protecting against rising sea levels may require investments amounting to as much as 52% of projected 2050 GDP.

Climate change is also threatening ASEAN’s food security due to extreme weather events such as typhoons, floods and droughts. Disruptions to the food supply and drops in demand can result in adverse impacts on economic development for many nations, including the Philippines, Indonesia and Vietnam.

The business case for sustainability

Although climate change and its impacts are troubling in both ASEAN and beyond, the transition to more sustainable business practices is a promising source of opportunities. Jonathan Drew, Head of ESG, Global Banking, HSBC Asia-Pacific, talked about where change has to occur and the role of green finance in this process.

To decarbonise energy intensive areas of their economies, as indicated above ASEAN nations need to invest significantly in generating low-carbon electricity from renewable sources. Jonathan spoke about the need to increase renewable electricity power production by five to six times current levels as part of the process to reduce the use of fossil fuels in areas such as transportation, agriculture and industrial processes.

Another aspect of the net zero story is technology and becoming more energy efficient. Investments in technology, Jonathan described, will not only help reduce ASEAN’s carbon footprint, but also increase its ‘handprint’, creating positive environmental impacts through the restoration of natural capital.

To achieve these goals and eventually reach net zero, significant capital is required. Jonathan explained how upwards of USD100trn in investment is needed over the next 10-15 years across a multitude of sectors, including transportation, telecommunications, water and sanitation and energy supply chains. Over 50% of the total investment is expected to be made in Asia.

The good news, Jonathan affirmed, is that upwards of USD200trn in investable private sector capital is available across global fixed income and equity markets. Of that total, the amount being allocated to sustainable activities has been rising – in 2020, sustainable bond issuance in Asia Pacific rose to USD100bn, up from USD86bn in 2019. Global sustainable bond markets topped $250 billon on the first quarter of 2021.

A similar trajectory can be seen in the loan market, with global sustainability linked loan volumes increasing from USD194bn in 2019 to USD240bn in 2020. This demonstrates a strong willingness among investors to support sustainable initiatives that provides the incentive for businesses to implement sustainability strategies across their operations.

Finally, investments in green, social and sustainability (GSS) bonds and other ESG strategies in APAC generally outperformed relevant benchmarks throughout 2020 further signalling the value markets are placing on sustainable businesses.

What sustainability looks like in ASEAN

During the panel discussion, Dr. Darian McBain, Global Director, Corporate Affairs and Sustainability, Thai Union, June Cheryl A. Cabal-Revilla, Chief Finance Officer and Chief Sustainability Officer, Metro Pacific Investments Corporation and Mr. Nguyen Ngoc Thai Binh, Deputy CEO cum Chief Financial Officer, REE Corporation, discussed sustainability and ESG in the context of their countries and businesses. Below are the key takeaways:

Sustainability trends

• Renewable energy projects and sustainable infrastructure initiatives are on the rise, with companies working to diversify their power sources and invest in green buildings.

• Ocean sustainability is a critical area of focus, the preservation of fisheries and marine life being essential to the economic wellbeing of many countries and companies in ASEAN.

• Climate change and its impacts is a key trend, particularly as it relates to air quality and extreme weather events like flooding and droughts. These concerns are acute in ASEAN and pose risks not only to infrastructure, but also peoples’ lives.

• Businesses in ASEAN are beginning to measure and align their targets with international sustainability standards to drive impact and promote universal principles on good governance and ethical business practices.

ESG objectives and business goals

• Sustainability strategies need to be measurable and tailored to the specific issues facing ASEAN as well as supportive of business growth and embedded in long-term strategic planning. The United Nation’s Sustainable Development Goals can act as an important reference in this regard.

• Given the volumes of green financing available, businesses in ASEAN are exploring the use of sustainability linked loans and green bonds as an incentive to transform the way they operate and do business.

• Employees in ASEAN businesses have an important role to play in addressing the sustainability challenges facing the region, requiring a corporate culture that prioritises purpose alongside profits.