Category Investments

Sustainable finance for a better world

18 October 2019 Kweku Bedu-Addo, CEO of Standard Chartered Southern Africa
Kweku Bedu-Addo, CEO of Standard Chartered Southern Africa

Kweku Bedu-Addo, CEO of Standard Chartered Southern Africa

With countries across the world grappling with how to fund important issues such as climate change and financial inclusion, the need for private capital to play its role has never been more important.

Growth in developing markets is leading to rapid urbanisation and creating increased need for infrastructure and technology and a growing demand for energy, food, water and goods.

Finance plays a key role in meeting these needs, in helping communities meet that growing demand, and in supporting sustainable and responsible growth, including delivering the UN Sustainable Development Goals (‘SDGs’). These goals focus on addressing global challenges such as poverty, inequality and prosperity.

The need to channel capital to emerging markets is also becoming increasingly crucial given they face a USD2,5 trillion annual investment gap in meeting the SDGs. Whilst 90 per cent of the SDG financing needs are covered in developed countries, only 60 per cent are addressed in emerging and developing regions, and as low as 10 per cent in Africa.

Green, social, and sustainability bonds support sustainable projects and can help to raise the funds necessary to combat climate change and increase access to finance and financing in emerging markets.

Despite the success of the burgeoning sustainable bond market, beyond China, only a very small percentage of green and social bonds have been raised to finance emerging markets.

In June Standard Chartered issued its first Sustainability Bond focused on emerging markets. Proceeds from the bond will allow the bank to finance more projects aligned to the SDGs, including wind turbines, solar panels, and water treatment, in least, low and lower-middle income countries in Asia and Africa

Although there is a growing investor interest to finance sustainable development in Asia and Africa, it is often hampered by an elevated perception of risk and a lack of investable opportunities. Investing in a sustainability bond gives investors access to emerging market sustainable finance with the comfort of investing in a respected and regulated bank.

The bank also recently launched the world’s first sustainable deposit for corporate clients, the funds from which will be used to finance projects aligned to the SDGs in emerging markets.

Sustainability and finance should go hand in hand if the world’s environmental and social challenges are to be solved. Financial institutions have an important role to play to promote economic and social development in a sustainable way and financing is a powerful tool to promote change and drive the growth of sustainability.

In delivering long-term value for their shareholders, society and the environment, banks can make a real difference while also benefiting from an enormous opportunity – the International Finance Corporation estimates there are USD23 trillion of climate-related sustainable finance opportunities in emerging markets alone in the years to 2030.

Emerging markets’ pathway to a low carbon future will have a major impact on the world’s ability to meet the Paris Agreement’s goal of keeping global warming below 2 degrees.

Much of this investment flow to emerging markets will be guided by and dependent on emissions data. Like action on climate change itself, measuring emissions is complex and requires action from multiple parties. Standard Chartered therefore announced last year that the bank would develop a methodology to “measure, manage and ultimately reduce” the CO2 emissions from the activities it finance.

At Standard Chartered we believe we have both an obligation – and a unique opportunity – to help ensure the sustainability of our planet. To help solve the world’s environmental and social challenges, sustainability should be at the forefront of finance.

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