AFTF 2023: from risk to sustainable opportunity

Building strategic advantage in the journey to net-zero carbon requires a change of mindset, according to Pollination Group Managing Director and Head of Impact, Zoe Whitton – away from the risk of the shifting climate and toward what can be created in response to the change.

Speaking at the 2023 ANZ Finance & Treasury Forum in Singapore, Whitton said many businesses were still approaching climate with the strict risk lens they rightly took on the subject years ago – leaving opportunities in the space to pass them by.

“The flipside of every risk is a response, and that response is usually an opportunity,” she told the event.

“The opportunity often comes from a shift in headspace, and sometimes it takes quite a long time to get people out of the risk headspace on transition.”

Whitton said the opportunity for businesses was around building value, and capturing value, through the transition to net-zero carbon.

“Many people, including investors, missed some of those early [climate] opportunities,” she said. “Everyone was very focussed on risk [and] laser focussed on the downsides.

“Five or six years ago you would have conversations with investors who would go, ‘yeah, you know, we know that renewables will sort of be a thing, but we don't need to be there quite yet’.

“You often have this conversation with the same entity three or four years later, and they would say, ‘we missed the boat’”.

Whitton made the comments on a panel with Natasha Garcha, Senior Director of Innovative Finance at Impact Investment Exchange (IIX), Jonas Millqvist, Co-Head of Origination, Asia & Pacific at the Export and Investment Fund of Denmark (EIFO), and Stephanie Vallance, Executive Director of Sustainable Finance International at ANZ. You can watch a short highlights video of the session below.

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Growth

Vallance said the global sustainable finance market had seen “tremendous growth” in recent years, partly on the back of increased support from policymakers.

“The policy and regulatory environment globally is a key driver behind that growth,” she said. “And increasingly we're seeing corporate treasurers really recognising the very strong connection between a credible sustainability strategy and ongoing access to capital.”

Whitton said there was a lot of room for innovation in the space – and participants were responding with new ideas.

“We are basically seeing people trying to find any way they can manage to finance this transition exercise,” she told the event.

One of these approaches includes blended finance, which can include funding support from governments – helping “make it just a little bit more possible for companies to undertake transition activities”, according to Whitton.

The blended approach “can be quite powerful, particularly in the industrial space”, she said.

Garcha told the event blended finance presented an opportunity for businesses to help bridge the gap between finance and development, citing the IIX and ANZ world-first ‘orange bond’ as an example.

“The next big emerging market is actually women,” she said, noting the correlation between better gender equality and improved financial performance.

“[There] is an opportunity for all of us to work together to build a gender-empowered financial system.”

The market is also seeing innovation around supply-chain finance, including “incentive systems of different types” that encourage sustainable business practices, Whitton said.

“We're seeing a lot of innovation on that front,” she said, particularly in sectors with “big supply chains full of a lot of… SMEs”.

Transition

Export credit agencies (ECAs) are a growing presence in the market as governments look to fill funding gaps in the energy transition.

Millqvist said groups like EIFO – an ECA from Denmark – should be seen as “adding capacity to the market”, given their work can free up private institutions to place funding elsewhere.

Rather than “having to collect 30 banks” to finance a major project, ECA participation means “10 to 15”, might be enough, he said.

Whitton said multilayer solutions were another growing presence in sustainable finance, particularly in the property sector.

“These are solutions that, when you implement them, you get to say, ‘that helped my nature goal, and it helped my climate goal, and it also helped my fuel cost’,” she said.

“We're starting to see a lot more people coming on to this idea.”

For Whitton, innovation around the nature of the financing is critical, but doesn’t negate a core tenant of all financing - the funding model needs to work.

“I'm saying that because a lot of people come to us going… ‘I don't have a business case, but I assume impact finance can make it work’,” she said.

“Most of the time it's not the case. You need the funding model to work.”