A bank-wide effort to grow sustainable finance in Asia Pacific
Banks have a critical role to play in scaling up finance and investment to address sustainability challenges. In Asia Pacific, a holistic approach is needed to support corporates and investors in their transition.
The Intergovernmental Panel on Climate Change (IPCC), the world’s leading climate science body, has left no doubt about the urgency to tackle greenhouse gas emissions.
The latest report1, released in March 2023 spelled out the need to scale up climate financing, calling for three to six times the current amount of investment.
“There is an urgency to act on climate,” says Stephanie Clement De Givry, Head of Global Banking and Advisory for Asia Pacific at Societe Generale. “Banks have a role to play to make sure that not only our own activity, but more importantly that of our clients, are pushing the business community towards decarbonisation.”
Societe Generale has identified key hurdles that companies face in financing their transition to net zero and is working to address them across its Global Banking & Advisory (GLBA), Global Markets (MARK) and Global Transaction Banking (GTPS) divisions.
These efforts align with the bank’s global commitment to contribute to sustainable finance with EUR 300bn by 2025. Asia Pacific, a fast-growing market for sustainable finance, will be instrumental to this ambition.
Sustainable lending: gaining credibility
The volume of green, social and sustainability-linked loans in the region reached around €124 billion in 2022, up from €92 billion in 20212. “In 2023, a number of market loan principles were updated by industry groups such as the Green Loan Principles, Social Loan Principles and Sustainability-Linked Loan Principles, suggesting that sustainable finance instruments continue to gain momentum as well as credibility,” says Yasmine Djeddai, Head of Sustainable and Positive Impact Finance for Asia Pacific at Societe Generale.
The Asia Pacific region offers great opportunities in terms of energy transition projects. In 2022, the region already exceeded half of the total investments worldwide (59%)3.
“As the level of energy transition investments as well as adoption of sustainable finance continue to quickly rise in the region, we see a growing number of classification frameworks and taxonomies for sustainable activities being considered and implemented by Asia Pacific countries. Collaboration towards achieving interoperability and as much convergence as possible between taxonomies is fundamental to efficiently channel capital into the region and unlock the funding needed to accelerate the energy transition,” says Djeddai.
Societe Generale’s clients will need to invest quickly and at scale in new technologies and new businesses to achieve their decarbonisation roadmaps. Societe Generale’s Global Banking & Advisory division is therefore strengthening its sector focus on key value chains and on new products to act as a true strategic partner, providing the innovative advisory and financing solutions that its clients need.
Sustainable transaction banking: growing potential
Meanwhile, as companies look to take action on emissions across their value chain, they are increasingly integrating sustainability criteria in their trade finance and procurement policies.
Leading global trade banks have unique access to data across these value chains and are well placed to help companies assess and address carbon emissions from their clients and suppliers. Sustainable trade financing is available to support companies that are aligned with social or environmental objectives and can help incentivise changes across the supply chain.
“Sustainable transaction banking has the potential to expand even faster given corporate demand for what it can offer,” says Shujue Cai, Head of Structured Trade and ESG Transaction Banking for Asia Pacific.
Efforts to introduce recognised standards for sustainable trade finance are adding to the potential of these instruments in global supply chains. The International Chamber of Commerce officially unveiled its pilot framework4 for sustainable trade at the COP27 summit in November last year, and Societe Generale is an active contributor to the pilot scheme.
Sustainable investing: the Asia opportunity
Societe Generale also recognises that sustainable investing in Asia Pacific is nascent but poised to evolve and grow. The region accounted for just 4% of the US$2.5 trillion of assets in sustainable funds worldwide in December 2022, as compared to Europe’s 83%, according to Morningstar5.
Amy Zhang, ESG Solutions and Product Strategist for Global Markets for Asia Pacific at Societe Generale, sees a significant opportunity to emphasize the importance of APAC markets among global investors.
A number of elements are crucial to ESG investors, she adds: whether the ESG investment aligns with their values and ethical standards; whether the performance justifies the risk taken; which environmental and socio-economic outcomes are generated, and how these outcomes are measured and reported.
Societe Generale’s Global Markets division is well placed to provide solutions that effectively address the above priorities with a long track record of ESG research, data and analytics, advisory6, and a full range of global markets investing, financing and hedging solutions embedding ESG considerations. In 2020, Societe Generale was the first bank to systematically integrate ESG criteria7 in its fundamental analysis, valuations and recommendations on equities.
With a consistent approach to ESG integration across Global Markets, Global Transaction Banking and Global Banking & Advisory divisions, Societe Generale strives to enable clients throughout Asia Pacific to reach their transition targets in their own operations and across their entire value chain. As climate change, social and economic challenges become increasingly urgent, this holistic approach will be key to accelerating the journey to a more sustainable future.
|(From left to right) Amy Zhang, ESG Solutions and Product Strategist for Global Markets, Asia Pacific; Stephanie Clement de Givry, Head of Global Banking and Advisory, Asia Pacific; Yasmine Djeddai, Head of Sustainable and Positive Impact Finance, Asia Pacific; Shujue Cai, Head of Structured Trade and ESG Transaction Banking, Asia Pacific.
1. The IPCC Sixth Assessment Report, https://www.ipcc.ch/report/ar6/wg2/
2. REFINITIV LPC Green Lending Review 1Q23