Deputy Prime Minister Tharman at the Singapore Apex Corporate Sustainability Awards Gala Dinner

Deputy Prime Minister Tharman delivered a speech at the Singapore Apex Corporate Sustainability Awards Gala Dinner on 19 November 2018.

Ms Goh Swee Chen,
President of the Global Compact Network Singapore (GCNS)

Distinguished Guests,

Ladies and Gentlemen,

It is my pleasure to join you tonight to recognise the good work of GCNS over the last decade in promoting corporate sustainability and forging partnerships for action, and the important efforts being taken by the organisations you are highlighting through tonight’s awards.

Businesses in Singapore, including many who are here tonight, are increasingly incorporating sustainability in their core business strategies. Some have gone further to make sustainability their brand identity. They do this not just to demonstrate corporate responsibility, but also in response to growing global awareness and the steady global shift in consumer preferences towards sustainable products and services. In a study by Unilever in 2017, one-third of the 20,000 respondents surveyed globally expressed a preference for sustainable brands.

There will be growing demand for sustainable products, and for financing of sustainable products. And there will be a growing global movement to switch away from products and business practices that undermine sustainability.

This is a movement that is necessary, and needs urgency. It is also, fortunately, inevitable - the growing consciousness among younger generations in particular, that sustainability is of critical importance to the world, is picking up pace and cannot be reversed.

The global market of consumers, and the financial markets, will increasingly penalise businesses that undermine the common good, and reward those who preserve and advance the common good. Businesses are increasingly recognising the need to retain the trust of populations by taking care of the interests of the next generation.

The shift in business models, to do well in business by serving the common good, is picking up pace.

Some of the major oil and gas companies are looking into clean energy to drive their future growth. A dramatic example is Neste, which was ranked the second most sustainable company in the world, and the best in the Oil and Gas industry, in the Global 100 index. It was not that way until a decade ago. Neste was for much of its 70-year history in the traditional business of fossil fuels, and Finland’s main source of energy supply. It has now become the world’s number 1 renewable diesel provider, with one of its largest renewable diesel plants being in Singapore, and renewable products contributed over half of its profits last year. Its ‘MY Renewable Diesel’ reduced greenhouse gas emissions by the equivalent of the annual emissions of 3 million passenger cars.

Another good example in a very different field is Sustenir Agriculture, which is in the business of urban farming. The ability to grow food locally in urban settings in itself can cut the need to ship food over distances, and provide assurance and quality in food supply. But beyond that, Sustenir has also applied technologies like controlled environment agriculture, to improve the yield and cut down resource use in farming. Its methods require less water, and produce food that has a longer shelf life, resulting in less wastage.

Key Roles of Both Regulation and Joint Responsibility

But widespread adoption by the corporate sector of sustainable practices will not come automatically, or quickly enough, if we leave this entirely to market forces.

There are two realities that we have to contend with in virtually all economies. The first is short-termism. The trade-off between short-term returns, which drive many shareholder decisions, and long term impact is a common feature in most markets.

The second reality is the trade-off between shareholder returns and those of all stakeholders in society. More companies are adopting objectives and taking actions that will reduce or eliminate this trade-off. But the reality is that the companies that have moved beyond the rhetoric of sustainability, to actually alter business models and practices, are in the minority, everywhere in the world.

Global consumer market preferences will eventually incentivise many more companies to do so, but it will take a long while for them to achieve the needed impact. If we wait for markets to provide the incentives, we will lose a critical window of opportunity to address the looming challenges of climate change, depletion of natural resources and loss of biodiversity - all of which will threaten the next generation.

This is why governments and regulatory bodies need to step in to implement policies that will incentivise sustainable practices; why all countries have to move together; and why there is a critical role for collective leadership through international and multilateral organisations.

That’s why the Government plays a role in achieving sustainability in Singapore. We are making several moves, including the introduction of carbon tax. We are also regularly enhancing our vehicular emission standards to reduce not only carbon dioxide emissions, but also air pollutants such as carbon monoxide, nitrogen oxide, hydrocarbon and particulate matter. We are also providing grants to help businesses become more sustainable, which were enhanced last month. And we are also providing significant support for partnerships between our universities and research institutions and private players, to test-bed and pilot efficient urban solutions.

There is also growing global recognition that financial systems have to play their role to achieve sustainability. Within the central banking community, the Monetary Authority of Singapore was one of the founding members of the Network for Greening the Financial System (NGFS) (launched in Paris in December last year), which aims to enhance the ability of the financial system to manage risks of climate change, and to mobilise capital for green and low-carbon investments.

Here in Singapore, the MAS has also included banks’ sustainability practices in its supervisory assessment of banks, so to strengthen our banks’ efforts to integrate sustainability into their core business and risk management processes. This complements our banks’ own efforts to make financing practices more environmentally responsible, building on the industry’s own Guidelines on Responsible Financing issued in 2015. There is much scope for innovation here. For example, DBS Bank recently introduced Asia’s first sustainability-linked loans, which peg the interest rate to a series of environmental, social and governance (“ESG”) performance metrics.

There is also growing appetite in the markets for green financial instruments. MAS has signed an MOU with the International Finance Corporation (IFC) to accelerate the growth of green bond markets in Asia, by enhancing the awareness and knowledge among professionals working in financial institutions and promoting the use of internationally recognised Green Bond standards, such as the recently-launched ASEAN Green Bond Standards. We introduced a Green Bond Grant Scheme last year to subsidise the costs of external reviews required by the Standards. To date, over $2 billion of green bonds have been issued by both local and foreign issuers.

More is being asked of corporates with regard to sustainability-related disclosures. At the global level, this is the focus of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (FSB TCFD). We are still very much in the early stages of this, but the Task Force will continue to promote and monitor adoption of its recommendations. We should expect these disclosure standards to be enhanced in the coming years.

In Singapore, SGX has introduced mandatory sustainability reporting on a “comply or explain” basis for all listed companies. The mandatory reporting just kicked in for financial years ending on or after 31 December 2017, and most companies would have only completed their first round of reporting this year. But the impetus for corporate sustainability is growing. It is an area that corporates are going to have to pay more attention to, whether they are tapping on bank-based financing or fund raising in the capital markets.

However, if we rely solely on government and regulators’ actions to achieve sustainability - whether by taxes or regulations - we will end up with more onerous requirements on business. That’s why it is far better for businesses to also take the initiative to craft sustainable strategies that yield long term returns. It is far better for governments, businesses and citizens to work together to achieve sustainability.

Corporate leaders, GCNS and the Carbon Pricing Leadership Coalition, play key roles - in demonstrating the viability of sustainable business practices, and in providing businesses with useful platforms to share experiences and collaborate on corporate sustainability.

Some of our award winners today are good examples of such leadership. Unilever, one of the global leaders in advancing corporate sustainability, has adopted a blueprint - the “Unilever Sustainable Living Plan” - that charts how it intends to decouple growth from environmental impact, and at the same time, increase its positive social impact through fairness in the workplace, opportunities for women and other inclusive business practices.

Let me end my speech by once again, congratulating all those being recognised through the Singapore Apex Corporate Sustainability Awards tonight. There is still much work ahead to spread sustainable practices, and I am sure all of us present will help advance the cause.

Source: Prime Minister's Office