ESG standards should be defined or local firms risk losing out

The UN COP26 coalition of investors vow to push companies to get on track to net-zero which means they will not lend or invest in non-ESG firms

by NUR HANANI AZMAN / Pic Source:

THERE is an urgent need for the environmental, social and governance (ESG) standards to be de ned clearly so that the industry players from emerging markets will not only design products and services that are “green” but also unlock and benefit from the US$100 billion (RM423.75 billion) carbon market.

Wawasan Open University George Town Institute of Open and Advanced Studies chairman Tan Sri Andrew Sheng (picture) said the United Nations (UN) Climate Change Conference 2021 (COP26) coalition of US$130 trillion investors vow to push companies to get on track to net-zero which means they will not lend or invest in non-ESG companies.

He said the problem with green finance is the danger of asset bubbles, with too much money chasing, if the companies in emerging markets cannot meet the ESG, money will go to advanced market companies.

“Khazanah Research Institute (KRI) and Khazanah Nasional Bhd need to take thought leadership in this area — define our own carbon footprint and show how government-linked companies (GLCs) and local champions can move quickly ahead of the ESG curve.

“If we don’t get our act together, Malaysian companies will be victimised by brown finance. If you are not green, you are brown, therefore they will not lend or invest. But who set the standard? The UN only this year has included the natural capital into the System of National Accounts,” he said in a panel discussion on Financing for Climate Action organised by KRI on Tuesday.

“How can we overcome these challenges in Malaysia? Effective climate action requires reconciling science with genuine action on the ground to deliver solutions that combat global warming and protect vulnerable communities and nature,” he said.

KRI chairman Tan Sri Nor Mohamed Yakcop said the climate crisis is a ticking clock, an existential threat for millions of people who face extreme weather events, floods, droughts, sea-level rise and threats to their livelihoods.

While Malaysia is not a major emitter of the greenhouse gases responsible for climate change, we are vulnerable to its effects, he said. “Protecting vulnerable communities and sectors and preventing further loss and damage will require a structural transformation of our economies to both reduce our contribution towards climate change and to reduce our vulnerabilities.

“Structural transformation of this nature will require greater financial resources. Our economy is caught between recovering from the pandemic and preparing to avert this future crisis. If we do not act early enough this decade, climate impacts could impose a further burden on our economy and jeopardise long-term development,” he said in his opening remarks.

Meanwhile, KRI senior research advisor Professor Jomo Kwame Sundaram opined that buying time for climate action is not enough solution, instead what we need is an alliance of people working at different levels be it international, regional and even national.

“We always have problems with collective action. We have seen for example there has been little progress of Covid-19 because of the greed of pharmaceutical and other companies that provide services and products. I think we have to recognise the failure of collective action is a problem.

“We need to act at many different levels to combat climate change and its impacts,” he added.

Third World Network head of programmes, Meena Raman said developing countries need more time and resources to adapt to the climate crisis and end the use of fossil fuels.

“Without a just transition that addresses inequality, many countries will continue to suffer from both poverty and environmental devastation.

“So, we do need to phase out from fossil fuels, but what’s fundamental is that it has to be based on what’s called just transition, so that the people who are energy poor, the more that they have access to renewable energy, the more that we ensure that they are not the victims of climate solutions,” she said.

Earlier, KRI launched a book titled “Buying Time for Climate Action: Exploring Ways Around Stumbling Blocks” by Jan Wouter Vasbinder (editor) and Jonathan YH Sim (editor).

The 2021 Intergovernmental Panel on Climate Change report made one thing crystal clear — global climate change is here to stay. Time is up. We need to act or climate change will lead to inconceivable suffering by billions of people.

“Buying Time for Climate Action” is the combined narrative of world-class experts, all committed to helping humanity survive its largely self-induced destructive course.