Fragmented approaches to sustainable finance may ultimately undermine the development of sustainable finance through increased complexity and lack of coordination.
ASIFMA has released a new report calling for greater global coordination to define international policy settings in relation to sustainable finance.
The report provides an overview of developments to date in major Asia Pacific jurisdictions, as well as the broader evolving international policy environment, examining practical implications for industry participants and policymakers.
In doing so, it shines a light on the varying approaches and emphasis within different jurisdictions and frameworks.
“With increasing global attention and momentum building across various markets, including those in Asia Pacific, there is a proliferation of related initiatives under way,” said ASIFMA head of policy & regulatory affairs Matthew Chan.
“Notwithstanding their positive intent, fragmented approaches introduce challenges that may ultimately undermine the development of sustainable finance, through increased complexity and lack of coordination.”
According to Herbert Smith Freehills partner Hannah Cassidy, firms today are navigating a confusing landscape of disclosure frameworks, incentive structures, data collection methods, and external assessments – developed and implemented in various markets and jurisdictions by both the public and private sectors.
“Over time, convergence to common frameworks is needed, whilst still allowing flexibility for nuance and differences between different economies’ paths to sustainability,” she said.
According to the report, a coordinated and holistic approach would catalyse innovation, incentivise greater participation from the private sector, and support continued growth and development of sustainable finance in markets.
ASIFMA sets out four principles for policymakers to apply to enhance coordination on sustainability issues, namely:
- to avoid requirements that are unduly complex or prescriptive
- to strive for consistency and compatibility
- to align policies and frameworks with international standards, where possible
- to catalyse the development of international standards in cases where they do not yet exist
“Global coordination is essential because like climate change, investing and financing do not take place within the bounds of clear borders, and cross-border capital flows are so vital,” the report says.
The report also calls for Asia Pacific voices to be heard more prominently in international discourse on policy issues relating to sustainability.
While urging Asia Pacific policymakers to engage more actively with their international counterparts, ASIFMA urges them to also consider forming a specific regional task force, or to work through other existing industry structures, to achieve the level of coordination needed for an effective regional approach to sustainability.
“Our intention is this paper is to take another step forward in helping the financial industry tackle what is an extremely complex, multidimensional issue,” said Chan.
The full report is available here.
The report was co-authored by Herbert Smith Freehills with its Indonesian associate firm Hiswara Bunjamin & Tandjung.