As global thinking shifts towards sustainable investing, there are significant opportunities for Singapore to reap the rewards of a greener economy. The 2016 Paris Climate Agreement, the introduction of a carbon tax in 2019 and Singapore’s Green Plan 2030 all point toward the country’s growing sustainability commitment. But there are still gaps in the picture. A key step in changing the green economy landscape is to nurture talents who can shape the future for better environmental and social outcomes, both in Singapore and beyond.
The demand is there. In its Skills Demand for the Future Economy report, SkillsFuture Singapore lists the green economy as a high-growth area. Recent parliamentary discussions also highlighted the urgent need to develop skillsets for green jobs. While support has been given to various research and educational initiatives, there could be more sustainability modules offered at Institutes of Higher Learning (IHLs). The Sustainable and Green Finance Institute (SGFIN) at the National University of Singapore (NUS), set up in 2021 to drive green finance in research and education, is a successful example supported by the Monetary Authority of Singapore (MAS).
As the list of environmental and social issues grows longer, we need people who can address contrasting priorities. This is why NUS Business School in collaboration with SGFIN have launched a new Master of Science programme in Sustainable and Green Finance, hosted by NUS Business School, which will start classes in August 2022.
Balancing Progress with Prosperity
At the recent COP26 conference, India’s Minister of Environment, Forest and Climate Change, Bhupender Yadav, remarked, “How can anyone expect that developing countries could make promises about phasing out coal and fossil fuel subsidies when they still have to deal with their development agendas and poverty eradication?”
This is the dilemma faced by many developing countries in their sustainability journey. When it comes to managing trade-offs, they are like painters who must decide whether to use golden, shimmery colours that speak of more prosperity or earthier tones that speak of greater care for the environment.
It needs not to be so, and the finance sector can help. Money talks and finance can significantly alter the picture in everything from developing greener technologies, to changing consumer behaviour. Several years ago, we examined how financial markets priced the social and environmental activities of publicly-listed companies. Many firms, with their traditional business models, were not reputed for being environmental-friendly. But when they tried to do more good, results showed that investors paid attention.
A rising class of environmental-conscious investors means greater motivation for firms to do good and show it. In order for that to happen, they need people who can distil the complicated relationship between environmental action and financial valuation.
Helping Businesses Navigate the New Normal
With more and more investors looking at sustainability when making investment decisions, many firms are struggling with the regulatory requirements of sustainability reporting. Some worry that the information disclosed would erode their competitive advantage, while others simply do not allocate sufficient manpower to measure their environmental impact. Many are too busy with more basic concerns, such as growing their revenue in order to survive.
Notably, sustainability reporting is not about just painting a rosy picture, or making pessimistic claims that environmental benefits cannot be in alignment with viable business strategy in the long run. Firms need to find the right people quickly to turn sustainability reporting to their advantage. By tracking their environmental impact, firms may uncover new revenue streams or ways of cutting costs. This requires a timely paradigm shift and re-strategising the entire business model and value chain.
But finding the right people is not easy. The traditional framework of finance trains corporate managers to make investment decisions based on a rigorous set of rules and considerations—the benefits must outweigh the costs. And now these corporate managers have to learn new skills—fast—in order to do the right budgeting and valuation for innovative sustainability initiatives and the holistic evaluation of the potential impact on firms and society.
Informing Public Policies
The right people need to understand not just finance, but public policy as well. Policymakers are moving fast to reshape the rules for building a greener and more sustainable economy. The carbon tax introduced by Singapore in 2019 is here to stay, and may even increase given the urgency of environmental and climate issues. Business costs will go up once the externalities generated by their activities (such as greenhouse gas emissions) are made explicit in the calculation of their bottom line. The right people are needed to help companies ingrain sustainability efforts in their business models, rather than as afterthoughts purely for compliance.
When it comes to shaping policies, research can help policymakers determine their economic impact. For example, we found that the improvement of plumbing in HDB flats, as well as the installation of visible meter readers, resulted in lower household water consumption. We also discovered that disclosing precise flight arrival timings in Changi Airport significantly reduced the idling time of taxis at airport terminals, leading to reduced carbon emissions. This evidence-based research is useful in informing policies that shape people’s behaviour, for better environmental outcomes.
Policies shape companies’ behaviour too. The establishment of carbon trading platforms in Singapore and other Asian countries could potentially change the behaviour of business entities. While it requires deeper investigation, our initial research evidence reveals that financial institutions are the most active market participants in these carbon trading platforms. As these institutions are not large carbon emitters, further research has to explore how to incentivise industrial firms to reduce their carbon emissions.
More Skilled Financial Talents in Sustainability
In recent years, the Asia region has seen the fastest growth in sustainable and green investing. Many financial institutions and intermediaries have participated in issuing sustainability-linked securities, evaluating sustainable investment projects, and making large amounts of capital investments. These organisations, due to their high deal flows, are in dire need of more skilled financial talents to comprehend and evaluate the environmental and social impact beyond the traditional financial returns. Many financial experts in green and sustainable finance were usually trained in European and American universities, and the need for ingenious financial experts in the Asian region is great. The market needs more financial talents with a contextualised understanding of the sustainable challenges faced here and who possess the right institutional knowledge and background.
Learning is Key
Sustainability is a long-term task, and we need more specialised human capital to comprehend and tackle these critical issues. We also need them to propose solutions that can be implemented on a greater scale.
The new MSc in Sustainable and Green Finance programme aims to train students in sustainable finance theories and sustainability frameworks. Besides gaining exposure to green innovations in the university, students will also gain an understanding of real-world challenges faced by the public and private sectors during their capstone projects. Many organisations have developed sustainable products or services, but they require professional finance experts to propose viable financial solutions for wider adoption and scaling. This is where our future students can contribute.
It is SGFIN’s mission to nurture a new generation of these financial experts. They think beyond the traditional approach of maximising financial profits; they channel capital flow to sustainable entities; they provide rigorous evidence for informing sustainability policies. Ultimately, they encourage families and firms to play their part in making Singapore and Asia better places to live in. And then the painting of a green economy landscape will be complete and the war for ESG talent won.
The article is an abridged version of the one first published in CNA.