Asian businesses step up to ESG reckoning (The Business Times)

In recent years, rising demand for mobility due to higher incomes and population growth have set in motion calls for more energy efficient transport. Less spoken about is environmentally-friendly rubber – the key raw material that vehicles run on – even as the consumption of natural rubber has risen by 5 per cent annually in the last two decades.

In 2019, Singapore bank DBS partnered with Halcyon Agri, a global leader in natural rubber, to set up HeveaConnect, a digital trading platform for sustainable rubber.

The online marketplace, which connects various stakeholders along the natural rubber supply chain, is one example of how private-sector players can come together to drive environmental, social and governance (ESG) consciousness.

ESG issues have been around for a long time, but recent years have seen a greater push for companies to commit to these efforts. The Covid-19 pandemic, in particular, has indelibly pushed many of these hitherto “invisible” issues into society’s collective consciousness.

Apart from ravaging the global economy and crimping supply chains, the pandemic also left permanent and visceral impact on the lives and livelihoods of many.

Questions are increasingly being asked regarding businesses’ roles in supporting their customers, employees, and society at large.

“Even as we are beginning to emerge from the worst of the pandemic, perceptions of what role businesses must play have increasingly morphed from a narrower definition of shareholder primacy, to one of needing to support sustainability and broader ESG agenda,” Joseph Poon, group head of DBS Private Bank, told The Business Times.

Accountability beyond shareholders

There is growing public discourse that corporate leaders must be accountable not only to their shareholders, but also to a broader network of stakeholders.

While governmental and regulatory support for ESG has been on the rise in recent years, effective and lasting change requires a ground-up approach, Mr Poon said.

He cited the example of HeveaConnect, which has over the last two years attracted larger industry bodies. Notably, the Singapore Exchange (SGX) in March this year announced a US$1.5 million investment through its wholly-owned subsidiary Asian Gateway Investments for a 9.09 per cent stake in the platform.

There is a growing body of evidence relating a company’s social and environmental impact and its financial performance.

A meta-study by New York University’s Stern Center for Sustainable Business and Rockefeller Asset Management, which examined more than 1,000 research papers, found that improved financial performance due to ESG becomes more marked over longer time horizons.

Corporate sustainability initiatives also appear to drive better financial performance due to mediating factors such as improved risk management and more innovation, the study found.

Why does integrating ESG into corporate agenda make good business sense?

DBS’ Mr Poon suggests that robust ESG practices can lead to a stronger corporate brand, access to cheaper financing and a larger pool of capital, and better stock price performance.

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The Business Times

14 July 2021

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