Making A Low-Carbon Economy Profitable For All

In December 2015 the international community (125 actors) came together to send one of its strongest signals on climate change.

The adoption of the Paris Agreement on climate change showed the global commitment to reduce carbon emissions, and curb the rise in global temperatures.

On April 22 this year, Singapore, the EU and its Member States were among the 175 parties who signed the Agreement in New York, signalling the start of national ratification processes that will allow for its implementation. The Paris Agreement is a huge achievement and marks a turning point in global efforts to combat climate change.  The urgent challenge now is to make the necessary transition to low-carbon, climate resilient economies.  Paris has set the international framework for this low carbon, climate-friendly transformation of the global economy.  Getting there requires decisive action by a broad range of actors.  The business community will have a particularly important role to play in that regard.

The scale and number of complementary initiatives launched by non-governmental actors at and around the Paris Conference was particularly striking. The “Lima to Paris Action Agenda” ties these together.  It aims to demonstrate the commitments and partnerships of cities, regions, businesses and civil society organisations to reduce greenhouse gas emissions and build greater resilience against climate change.

These include the Portfolio Decarbonisation Coalition where over 20 major private investors have so far committed to decarbonising US$600 billion in assets. Then, there is the Breakthrough Energy Coalition, led by Bill Gates, where private investors have agreed to invest ‘extraordinary levels of private capital into clean energy’.

Also notable is the Business Leadership Criteria on Carbon Pricing where CEOs representing US$1.9 trillion in annual revenue have pledged to integrate carbon pricing into long-term corporate strategies, investment decisions and public policy efforts. This is just a sample of the numerous cooperative initiatives involving over 10,000 non-state actors in 180 countries, including one-third of the 2,000 biggest global companies.  Together these initiatives aim to redirect investment equivalent to the combined GDP of China, Japan and Germany. 

It is encouraging to see that the financial sector has also begun to shoulder its responsibilities. The Financial Stability Board’s Task Force on Climate Risk Related Financial Disclosures helps companies understand what financial markets want from disclosure in order to measure and respond to climate change risks and encourage firms to align their disclosures with investors’ needs. Recommendations are expected to be ready by December this year.

Singapore, as a business and financial hub, can play an important role in South East Asia and internationally. It is ideally positioned to mobilise private sector engagement and investment behind global efforts to address the climate change challenge and promote environmental sustainability.  The publication late last year  by the Association of Banks in Singapore of new industry guidelines expecting banks to disclose environmental, social and governance policies to advance responsible financing, is a sign that this is already starting to happen.

Tools such as carbon pricing and financial products and services, both traditional (project bonds) and specific (green bonds, sustainability bonds), can help create incentives for such a transition. Within the Asia Pacific region, many countries have begun work on such initiatives. Among them, the largest contributor to global carbon emissions, China, is now building a national carbon market. Through the Green Finance Study Group, China has made mobilisation of private capital for low carbon projects one of its G20 presidency priorities.

To capitalise on this growing momentum, the EU and some of its Member States started in 2015 a series of events in Singapore addressing, in particular, the role that the financial industry can play in this joint undertaking. Last November, industry representatives presented their views at a public forum ‘Transitioning to a low-carbon economy – what can the financial sector do’ the discussion showed that business and investors alike are ready for the low carbon transition and are looking for readily available tools and incentives. We will continue this debate in a follow-up event on June 17 entitled ‘Making the low carbon transition profitable for all: incentives for the transition’ where some of the risks and opportunities involved will be discussed by experts from both the public and private sectors.

While this transition has been highlighted as an imperative by world leaders, underlining its profitability for business remains essential. Private and public sector must rapidly increase their collaborations and partnerships, to drive down costs and catalyse the transition towards a low carbon economy.

Ambassador Michael Pulch, European Union

Ambassador Gerard Cockx, Belgium

Ambassador , Benjamin Dubertret France

Ambassador Michael Witter, Germany

Ambassador Håkan Jevrell, Sweden                          

Ambassador Scott Wightman, United Kingdom