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Sustainability in supply chains stands out as a beacon of change in business practices at a time when environmental concerns dominate global discourse. Business ethics, eco-consciousness, and responsibility are more than buzzwords; they’re a paradigm shift. Read more about why businesses need to integrate supply chain in their processes below. 

 

Environmental and Social Dimensions of Supply Chain Sustainability

In supply chain sustainability, the entire lifecycle of a product is considered, from conception to disposal. At each stage of production, distribution, and consumption, the environment, social, and economic impacts are considered. The importance of environmental stewardship in the supply chain cannot be overstated. Environmental footprints are increasingly being analyzed by businesses and measures are being taken to reduce them. In order to accomplish this, we must minimize carbon emissions, use renewable energy sources, optimize transport routes, and create eco-friendly packaging. 

Furthermore, social responsibility is essential to a sustainable supply chain. Human rights are being respected throughout the supply chain as companies strive to ensure ethical labor practices, fair wages, and safe working conditions for their employees.

 

Multi-Faceted Advantages of Embracing Supply Chain Sustainability

There are many benefits to adopting supply chain sustainability. Besides reducing pollution and resource depletion, it fosters business innovation and efficiency as well. Through reduced waste and increased operational efficiency, sustainable practices can lead to cost savings. There is a growing conscientiousness and value-driven dynamic among consumers today. Their values align with those of the companies they choose to do business with. Sustainable practices aren’t just moral obligations; they can boost brand reputation, loyalty, and competitiveness. In order to achieve supply chain sustainability, all stakeholders need to work together and commit to it. As part of this process, partnerships are formed with ethical suppliers, local communities are engaged, and environmental regulations are strictly adhered to.

 

How does Rimm help with Supply Chain Sustainability?

At Rimm, we provide a comprehensive and unified supply chain solution that streamlines supplier engagement to help organizations measure, analyze, and significantly improve their Scope 3 emissions. With our solution, supplier emissions can be significantly reduced, leading to growth for companies.

Ultimately, supply chain sustainability isn’t just an option; it’s a necessity for businesses navigating the challenges of a rapidly changing world. Integrating sustainability into every aspect of the supply chain allows companies to create a world that harmonizes economic growth with environmentally friendly practices and social responsibility.

 

In a powerful TEDx style presentation at the Indian Global Forum in Dubai, Vivek Aswani, Rimm’s Chief Commercial Officer, shed light on the critical environmental challenges facing our world today and outlined a roadmap for sustainable transformation. Here’s an encapsulation of the enlightening insights shared during his address.

The Present Predicament

The stark reality looms large—our planet’s sustainability is at a tipping point. The target Co2 level to sustain Earth stands at 300 ppm; however, the current count hovers at an alarming 417 ppm and continues to rise unabated. Over the years, annual emissions have surged from 11 billion to a staggering 37 billion units since 1960. The imperative is crystal clear—to avert an irreversible rise in Earth’s temperature, we must collectively achieve net-zero emissions by 2050 and halve our emissions by 2030, a mere six years away.

Despite the clarity in our goals and the urgency of the situation, no country is on track to meet these emission targets. Governments and international organizations often delay their efforts, altering policies and plans inconsistently. Consistency and resolute determination are imperative. It’s vital for the public to be discerning about the policies presented during elections, as strong leadership is crucial for a country’s pursuit of net-zero goals.

The Role of the Private Sector

The transformative power of the private sector cannot be understated. Businesses, regardless of size, wield the potential to effect positive change. Their participation is vital in steering the sustainability narrative towards a brighter future.

Opportunities for the Private Sector

Through aiding various businesses and projects in measuring their carbon footprint and sustainability practices, Rimm identifies multifaceted opportunities within the private sector:

1. Renewable Energy
   

   The competitiveness of renewable energy as a power generation methodology has surged, saving costs significantly. Solar energy, priced at 6c/kWh, and the cost-efficient operation of Electric Vehicles have reshaped consumer preferences towards sustainability.

2. Alternative Proteins
   

   An emerging trillion-dollar opportunity by 2050, alternative proteins, derived from plants, fungus, algae, and cultured meat, promise to revolutionize food technology, offering a net-zero avenue in the realm of food.

3. Electrification of Homes and Offices
   

   Especially in developing markets like Nigeria and India, optimal solar radiation allows for the installation of greenfield infrastructure, addressing energy needs and promising potential business returns.

4.  Sustainable Transportation
   

   From sustainable jet fuel production to the adoption of EV mobility for rural distribution, major shifts in corporate strategies align with the urgent need for climate action and net-zero initiatives.

Harnessing Technological Solutions

Cutting-edge technology stands as a beacon to navigate the complex landscape of Environmental, Social, and Governance (ESG) principles. Rimm Sustainability, an ESG consulting firm, leverages AI-driven solutions, uniting sustainability expertise with data science. These solutions empower organizations, offering transparency and accuracy in decision-making, aligning operations with the urgency of achieving net-zero emissions. At Rimm, the foundational belief is clear—effective management of sustainability stems from precise measurement.

The Call to Action

The time for mere words has passed; concrete actions are imperative. Sustainability and achieving net-zero are no longer choices but necessities for the survival and continued growth of life on our planet. Entrepreneurs and leaders must seize this moment to spearhead positive change, not just for their businesses but for the shared world we inhabit. The inevitability of the impact of climate change on businesses and daily life in the private sector is palpable. Together, a Net Zero revolution beckons—a legacy we must gift to the next generation.

Vivek Aswani’s insightful speech underscores the urgency and opportunity encapsulated in the pursuit of sustainability, igniting a call for action in the private sector to lead the charge towards a more sustainable future.

As we look forward to 2024, impact investing, circular economy initiatives, supply chain transparency, and stakeholder engagement must receive special attention. These trends suggest a broader societal shift towards more sustainable, responsible, and ethical business practices, driven by both consumer demand and regulatory pressures.

 

 

In the global quest for sustainability, COP28 signals a pivotal moment for Environmental, Social, and Governance (ESG) solutions, specifically towards emissions reduction. Read on to get a low down on what was discussed at this key event!

 

COP28’s Focus on Emission Reduction

COP28 reinforces the goals and concrete actions established in previous COP meetings to combat greenhouse gas emissions. It emphasizes more than mere commitments, emphasizing how transformative technologies are crucial for achieving substantial reductions across industries.

 

Technological Vanguard: Key Innovations Driving Emission Reductions

1. The Renewable Energy Revolution
   

   In recent years, renewable energy sources, such as solar, wind, hydroelectric, and geothermal power, have transcended the realm of alternative energy into the mainstream. A combination of advances in these sectors, combined with falling costs, has the potential to drastically reduce energy sector emissions by phasing out fossil fuels.

2. Accelerating Electric Mobility
   

   The global shift toward electric vehicles (EVs) plays a pivotal role in decarbonizing transportation. With the advancements in battery technology and greater charging infrastructure, EV adoption will accelerate, resulting in significant reductions in emissions from transportation.

3. Nature-based Solutions

   Nature-based solutions, including afforestation, reforestation, and sustainable land management practices, contribute to carbon sequestration. In addition to reducing emissions, these approaches enhance biodiversity and support vulnerable communities.

4. Smart Infrastructure and Energy Efficiency

   Optimizing energy consumption requires investing in smart grids, energy-efficient technologies, and sustainable urban planning. Through intelligent building designs and IoT-enabled systems, these innovations reduce emissions and enhance resilience while promoting energy efficiency across sectors.

5. Harmonizing Agriculture and Food Systems

   Agricultural and food emissions can be reduced with innovative technologies, policies, and individual actions. Furthermore, plant-based diets reduce greenhouse gas emissions. Farmers need to embrace technology, use renewable energy, and reduce emissions. In addition to empowering consumers, this strategy encourages mindful food choices. To mitigate climate change, the government, industry, and communities must work together. The use of alternative proteins can reduce livestock farming emissions. The use of cellular agriculture and plant-based substitutes can significantly reduce greenhouse gas emissions. We can reduce our environmental impact by replacing conventional animal agriculture with these alternatives. They address concerns regarding deforestation, methane emissions, and water usage. As these technologies advance, we will be able to provide sustenance and combat climate change.

The Path Forward: What needs to be done?

In the wake of COP28, collaboration among governments, industries, and innovators becomes increasingly important. To ensure equitable adoption of these technologies, developing nations must prioritize access to finance, technology transfer, and capacity building. Developing policies that incentivize and facilitate the deployment of technologies that reduce emissions is crucial. In order to drive global transformation, robust regulatory measures, such as carbon pricing mechanisms and emissions trading schemes, need to be in place. The success of COP28 lies not only in its ambitious commitments but also in its tangible actions and collective willingness to implement transformative technologies. For a sustainable, climate-resilient world, innovation, policy, and public engagement must work together.

 

How does Rimm Sustainability come into the picture?

This year’s COP28 is shining a brighter spotlight on emission-reducing technologies than ever before. In this critical era of climate action, ESG SaaS platforms are indispensable tools, instrumental in propelling industries toward a more sustainable and environmentally conscious future. Rimm Sustainability, an ESG SaaS platform stands as a pivotal enabler in the quest to bridge the gap between aspiration and action in driving emission reductions during the era of COP28. The transformative technologies brought forward by Rimm such as ‘CR360’, a climate transition tool serve as the bedrock for companies, offering a cohesive framework to aggregate, analyze, and act upon crucial environmental, social, and governance data. By providing real-time insights, these platforms empower decision-makers to craft and implement strategies that tangibly reduce emissions, aligning with global sustainability objectives. Rimm’s AI driven sustainability solutions facilitate compliance with evolving regulations but also foster innovation by guiding businesses toward sustainable practices. 

 

 

In today’s dynamic and socially conscious world, ESG is a fundamental benchmark for evaluating a company’s sustainability and ethics. An ESG score plays a crucial role in assessing a company’s performance. Read on to learn more about how ESG can be properly and accurately measured in order to reflect a company’s true sustainability performance. 

Unpacking ESG: A Brief Overview

A company’s ESG criteria measure its impact on sustainability, social responsibility, and corporate governance. Among the environmental factors that determine a company’s ecological footprint are energy use, carbon emissions, and resource management. In terms of social considerations, we focus on employee relations, diversity, human rights, and community involvement. A company’s leadership, transparency, ethics, and compliance practices are assessed by governance factors.

What is so significant about an ESG Scoring Methodology? 

The ESG scoring methodology serves as the framework through which companies are assessed and compared based on their ESG performance. It involves a systematic approach to gathering, analyzing, and quantifying relevant ESG data. This enables the creation of scores or ratings that indicate a company’s performance in each ESG category. Stakeholders and investors can use these scores to gauge how sustainable a company is.

What makes up an ESG Scoring Methodology?

1. Data Collection: ESG data is gathered from various sources, including company reports, regulatory filings, independent research, and ESG data providers. The data can be quantitative (e.g., carbon emissions, diversity ratios) or qualitative (e.g., corporate policies, ethical practices).
2. ESG materiality assessment: Identifying the most relevant and impactful ESG factors for a certain industry or company. To make sure the scoring reflects the most important issues for a company, this step is crucial.
3. Weighting and scoring: Assigning weights based on what’s important and impactful. Companies are then rated or scored based on each factor, often on a numerical scale.
4. Benchmarking: Normalizing the data makes it easier to compare companies in the same industry. Benchmarking allows stakeholders to assess a company’s ESG performance relative to its peers.
5. Reporting and validation: Ensure accuracy and reliability by rigorously validating data quality and scoring methodologies. Whether through reports, indices, or ratings agencies, the results help stakeholders make decisions.

Challenges and Evolving Trends

In addition to data reliability, standardization, and the subjective nature of certain ESG factors, ESG scoring methodologies face several challenges. In spite of this, the field continues to develop, with a focus on data quality, transparency, and industry-specific frameworks. ESG data providers are responding to these challenges by introducing new technologies and techniques, such as machine learning, to improve their ESG scoring. Additionally, data providers are working to increase transparency and comparability between different ESG scoring systems. By continuing to innovate, ESG data providers are ensuring that the field continues to evolve and provide reliable and useful data.

The ESG scoring methodology is a great tool for investors and stakeholders looking to align their investments with ethical and sustainable principles. An ESG score that’s standardized, transparent, and comprehensive will be crucial to foster public trust and enable informed decision-making. A commitment to enhancing ESG practices is beneficial for companies’ resilience and reputation. Additionally, it makes the global economy more sustainable and responsible. 

In this blog, Rimm Sustainability’s ESG Strategy Advisor discusses 3 myths which she has come across during her professional career working with multiple leadership teams as they formulate their ESG strategy and integrate it into their core businesses. 

Myth 1: ESG is an obsession within the corporate world

ESG is frequently referred to as if it is a stand-alone concept which is so unhelpful.
ESG encompasses everything you do in your business and how you do it. The all-important ESG ratings are simply a way of evaluating this, and consequently the company’s resilience and long-term investment potential. 

1. The ‘E’ represents your impact on the planet: your waste from manufacturing, your travel footprint.  But also the impact of the planet on you, such as a drought that destroys the cocoa you need for your chocolate production. 
2. The ‘S’ refers to contribution to your community. Making sure that employees are paid a living wage and that fair taxes are paid.  If your products contribute to social problems such as obesity, make sure you have a mitigation strategy.
3. The ‘G’ refers to how you conduct yourself, for example being ethical when dealing with customers and suppliers. It is essential that the company has an effective Board of Directors to steer the company toward its goals.

Myth 2: ESG is all about managing risk

There are undoubtedly risks, such as:

• Risks associated with compliance:
  • • • Standards for reporting are constantly evolving.
      • Lenders may request data to demonstrate your investment potential.
      • Prior to pitching for a new business, customers pre-screen your ESG data. 
• Operational risks:
  • • Special taxes – for example sugar tax on fizzy drinks – can significantly impact profit margins.
    • Needing data-based evidence base for marketing claims, like vegetarian burgers being better for the planet than beef burgers.

The relevant data is embedded throughout the enterprise, so it is difficult to obtain and then to understand. However, the art is in turning this on its head and looking for opportunities. The data can be used to identify ways to reduce waste and save money, such as heat and light consumption in offices and unnecessary travel. When you are proactive and diversify your supply chain to reduce flood risks before a crisis occurs, you will have an advantage over other companies in securing limited alternatives at acceptable prices. It may also be possible to obtain innovation funding from grants or green finance if you adapt your products early to evolving attitudes on carbon or health.

 Myth 3: Just doing the ‘right thing’ is enough

It’s a start, but it’s not enough. 

To support your claims, stakeholders demand transparency and data-based evidence. Don’t let that hard-to-find data go to waste. Act with it, track it, and share it. To bring the story to life, you will also need to provide supporting examples.

The ‘true’ perspective on materiality can only be gained by looking externally as well. Your customer ratings, press comment, and benchmarking yourself against your competitors are all important factors. 

However, be wary of “greenwashing” when promoting your sustainability credentials. You must ensure you are transparent and that what you say is supported by the facts. A major US airline has just been sued for $1 billion because it did not live up to its carbon neutral claim. Make sure you are not caught out!

 

Listen to our podcast episode here, where our CEO and Founder, Ravi engages with Sue in an in-depth discussion on these myths and how companies can avoid falling into these traps. 

Climate change and environmental degradation require more transparency in corporate sustainability reporting. Leading this conversation, we have The Task Force on Nature-related Financial Disclosures which incorporates nature-related risks and opportunities, much like its predecessor, the TCFD. Read on to find out more about this new and upcoming approach! 

Understanding TNFD

In June 2021, TCFD created the Task Force on Nature-related Financial Disclosures. Nature plays a critical role in economic stability, as recognized by the TNFD initiative, which has the support of numerous organizations and financial institutions. Organizations are encouraged to report on their nature-related risks and opportunities in a standardized and consistent manner as part of the task force in an effort to bridge the gap between environmental and financial issues.

Why does TNFD Matter?

1. Ecosystem Dependency: Ecosystems provide a variety of resources to businesses, including clean water, pollination, and timber. In addition to quantifying and communicating these dependencies, TNFD disclosures raise awareness about environmental conservation.
2. Risk Assessment: TNFD provides a structured framework for assessing nature-related risks. As a result of supply chain disruptions, regulatory changes, or reputational damage, companies can identify vulnerabilities.
3. Market Resilience: Investors increasingly factor environmental and social governance (ESG) criteria into their decision-making processes. Information provided by TNFD disclosures is vital to assessing a company’s environmental resilience.
4. Regulatory Landscape: Companies must adapt to evolving compliance requirements as governments worldwide intensify environmental regulations. This emerging regulatory environment can be aligned with TNFD disclosures.

Key Components of TNFD Disclosures

TNFD disclosures can be divided into four main components:

1. Governance: Companies need to disclose their commitment to integrating nature-related considerations into their decision-making processes. This includes outlining the responsibilities and structures in place for addressing nature-related risks and opportunities.
2. Strategy: This section covers the company’s strategies and targets related to nature. It details how the company identifies, assesses, and manages nature-related risks and opportunities.
3. Risk Management: Businesses must disclose their processes for identifying and mitigating nature-related risks, including their methods for assessing and responding to potential biodiversity loss or ecosystem degradation.
4. Metrics and Targets: TNFD encourages the disclosure of quantitative metrics and targets that reflect the company’s impact on nature, such as carbon emissions, water usage, and land use. These metrics help investors and stakeholders gauge the company’s environmental performance.

Benefits and Challenges

TNFD offers a number of benefits as well as challenges. Through TNFD, corporate accountability can be encouraged by assessing and disclosing nature-related dependencies and impacts. By doing so, businesses are able to mitigate risks, become more resilient, and innovate in sustainability practices. As long as it is incorporated into regulations, it improves investor confidence and ensures compliance with evolving environmental standards.

However, there are challenges relating to the availability of data and subjectivity in assessing nature-related factors as well as the decision of scope and limitations in resources. It can be challenging to integrate TNFD into other reporting frameworks and quantify nature-related impacts. Overall, TNFD has the potential to drive positive change in corporate sustainability practices, but its effectiveness depends on addressing these challenges and encouraging wide adoption among organizations, which will result in more responsible and environmentally conscious business practices as a result.

 

Conclusion

In recognition of nature-related financial risks, the TNFD disclosures represent a significant step forward. We must take into account nature-related considerations in all financial reporting as climate change and environmental issues increasingly affect our world. This isn’t just a compliance matter; it’s a strategic imperative. Nature can enhance the resilience of organizations to environmental challenges and also contribute to a more sustainable future for everyone when they adopt TNFD guidelines and incorporate them into their business models.

Mr. Osamu Yamamoto from Unison Capital, an esteemed client and strategic partner of Rimm Sustainability participated in a webinar on 27th September 2023. Founder and CEO Ravi Chidambaram moderated the webinar, which was joined by Sasja Beslik, Senior Advisor for data analytics. Check out the key highlights below!

About the Webinar

This webinar explored how Rimm’s fund and asset manager ESG solution helps Unison Capital improve their portfolio business. The founder also engaged Sasja and Unison Capital in casual conversation in an informative and engaging manner. The discussion focused on how portfolio management can drive ESG growth in the financial services sector. Additionally, ESG reporting was discussed as an important aspect of financial institutions’ reporting.

Benefits and Challenges of ESG reporting

A discussion among the three industry experts began with everyone weighing in with their expert opinions on the benefits of ESG reporting for financial institutions. Some of the benefits highlighted were ease in obtaining government grants, tax reliefs, favourable fund-raising opportunities ease in investing etc. After that, Ravi went on to discuss some of the major challenges facing financial institutions. In Sasja’s opinion, most firms don’t care about sustainability or lack the resources or expertise to report on environmental, social and governance issues.

Advanced Analytics

The discussion then turned to technologies currently being developed to address financial institutions’ sustainability reporting challenges. Mr. Yamamoto emphasized the importance of education. Due to the lack of knowledge about sustainability reporting by many firms, interactive means should be used to educate them about such forms. Sasja spoke about his work with Rimm Sustainability on advanced analytics such as True materiality, Carbon Triangulation, Risk Approximation, and other tools designed to automate and simplify sustainability reporting to save time and resources compared to traditional approaches.

Rimm Sustainability x Unison Capital

A major highlight of Ravi’s closing remarks was how Rimm’s fund/asset manager solution enhanced Unison Capital’s ESG compliance. Rimm developed a dashboard that enables fund managers to assess their portfolio’s performance on key metrics as well as easily report the performance to their LPs. This reduced time and resources for all stakeholders while making the assessment and reporting much clearer. We can tailor the dashboard towards the key KPIs and metrics for each fund or for specific reporting and can be adapted to different management scenarios. Rimm’s flagship product myCSO was praised by Osamu Yamamoto for its unique ESG solution and its technology. “myCSO enabled Unison Capital to visualize corporate sustainability across their portfolio, and offer concrete, detailed advice towards portfolio company management for improving corporate sustainability.”

Learn all about the discussion in the webinar by clicking here.

In our rapidly changing world, the landscape of risk is shifting beneath our feet. Among the most critical challenges confronting financial institutions and enterprises today is transition risk. But what exactly is transition risk, why is it crucial for businesses to take proactive measures, and how can Rimm’s CR360 Solution come to the rescue?

To mitigate the physical risks associated with climate change, we have no alternative but to transition towards a low-carbon economy. Transition risk therefore looms on the horizon. It refers to the business-related challenges and uncertainties that organizations can face as the world transitions towards a more sustainable, low-carbon, and environmentally responsible economy. Transition risk takes various forms:

1. Policy and Regulatory Risk: A shifting landscape of policies and regulations can significantly impact businesses. Stricter environmental rules may force companies to reduce emissions or adopt cleaner technologies, potentially resulting in dramatic costs and operational changes.
2. Market and Technological Risk: The tides of market dynamics and technological evolution can sway industries. Shifts in consumer preferences for eco-friendly products, emerging sustainable technologies, and resource scarcity can shake the foundations of traditional business models.
3. Reputation Risk: Mishandling the challenges raised by the transition can harm a company’s reputation, eroding trust, investor confidence, and employee morale.

In 2021, Deloitte’s report revealed that, if unaddressed, transition-related risks could destabilize the financial system, costing banks trillions of dollars in the decades to come. Given the seriousness of this emerging threat, many financial regulators and stock exchanges are now encouraging or requiring companies to adopt transition risk assessments, following the guidelines laid out by the Task Force on Climate-related Financial Disclosures (TCFD).

Rimm Sustainability is one of the very first to develop an automated SaaS tool – the CR360 Solution – that assesses how transitioning towards a low-carbon economy can affect a company’s financial landscape on a yearly basis from now up to 2050, assuming the company maintains business as usual. The CR360 Solution adopts a scenario-based approach. Scenarios provide the projected values of key macro-economic variables along potential transition pathways, factoring in myriad variables like energy use, technological shifts, policies, economic trends, and demographics, as well as their interactions. The model underlying the CR360 Solution thus employs those projected values to impact the financial projections of a given business over the critical decades ahead.

What’s the payoff? With Rimm’s CR360 Solution, businesses can:

1. Identify Vulnerabilities: Pinpoint risks and devise effective mitigation strategies.
2. Explore New Avenues: Delve into sustainable business models, products, and services, often leading to fresh revenue streams.
3. Adapt Governance: Stay agile in a rapidly changing landscape.
4. Boost Transparency: Meet the increasing demand for transparency and bolster investor confidence to attract capital.

Rimm’s CR360 Solution is not just about managing risk; it is about seizing opportunities. It empowers financial institutions and companies to not just weather the transition storm but to chart a visionary course toward a secure and sustainable future.

Today, sustainability isn’t just a buzzword; it’s a critical component of long-term success and ESG principles are becoming increasingly important for companies. ESG benchmarking has become a valuable tool on this sustainability journey. In this concise guide written by Rimm Sustainability’s Senior Data Scientist Wei Ti Goh, we explore the world of ESG benchmarking and its significance.

Defining ESG Benchmarking

ESG benchmarking is the process of systematically comparing a company’s ESG performance to that of its competitors. It offers a structured way to measure and evaluate a company’s environmental impact, social practices, and governance standards. By doing so, it promotes transparency and accountability.

Choosing Key Metrics

The choice of ESG metrics for benchmarking depends on the industry and the competitors in question. Industry-specific metrics take precedence, addressing the unique challenges and opportunities within a sector. For instance, companies in the software industry often prioritize social aspects, focusing on data privacy policies, gender pay gaps, and training hours. However, certain universal metrics, such as Total Carbon Emissions and Total Energy Usage, apply across industries.

Benefits of ESG Benchmarking

The benefits of ESG benchmarking are manifold. Firstly, it helps companies identify their strengths and weaknesses in ESG performance. As the saying goes, “If you can measure it, you can manage it.” Armed with this data, organizations can prioritize ESG initiatives and allocate resources more effectively.

Moreover, robust ESG performance enhances a company’s attractiveness to ESG-focused investors and customers. It demonstrates a commitment to sustainability, which can translate into a competitive advantage. ESG benchmarking also plays a crucial role in ensuring compliance with regulations and avoiding penalties.

How Rimm can help?

Rimm has a data repository of over 18,000 companies which are spread across several geographical locations (Americas, Europe, Africa Oceania and Asian-Pacific regions). Through its analytical tools, Rimm also enables you to gain powerful insights into strengths and weaknesses, which you can use to benchmark against fellow peers’. Get relevant data that you can utilize immediately to grow your business, generate sustainable value, and make ESG a cornerstone of your company’s business strategy.

 

Transparency is the bedrock of trust in the sustainable bond market, ensuring that investors can make informed decisions and fostering accountability in financing projects with positive environmental and social impacts.

Green, Social and Sustainability (“GSS”) bonds have become an important part of global fixed income markets, as institutions and individuals look to align their investment portfolios with environmental, social and governance (“ESG”) priorities or with internationally recognized principles such as the United Nations Sustainable Development Goals.

In 2022, issuance of GSS bonds in Asia accounted for nearly one quarter of the global total, according Moody’s, with around US$115 billion of green bonds, US$54 billion of social bonds and US$29 billion of sustainability bonds.  The rapid growth in transaction volumes – which Moody’s expects to continue this year – has been largely driven by government policy and regulatory support, including country net zero targets, benchmark sovereign bond issues and a strong push towards developing regional and national standards and taxonomies.

At the same time, investor appetite for sustainable assets like GSS bonds is steadily increasing.  A report last year by Accenture found that around one third of Asia’s affluent investor base already invested along ESG lines, while a further 37 percent planned to do so in 2023.  This trend is likely to continue, as younger investors, who typically report greater interest in ESG, become the dominant decision makers in the region.

Varying standards

GSS bonds, also known as “labelled” bonds, are financial instruments whose proceeds must be used specifically for funding projects with dedicated environmental and/or social benefits.  Issuance of these securities has become widespread across several Asian economies, but there is still considerable divergence in the understanding and adoption of sustainable practices across different issuers, and consequent inconsistency in the quality of labelled bonds brought to market.

Against a backdrop of evolving regulation across the region, investors may struggle to verify the attributes associated with a bond in a particular country, and also to compare one against another.  Existing standards currently differ with respect to project criteria, green definitions and verification, while the methodologies used by the external reviewers and third party experts employed to certify their credentials also vary widely.

These conditions expose investors to the potential risk of funding activities whose sustainability performance does not meet their expectations, and opens them up to possible accusations of “greenwashing”.

Greater global transparency

One strategy for issuers and investors in the region is to look towards international standards for greater transparency.

The Green Bond Principles is a set of voluntary guidelines put together by the International Capital Market Association (“ICMA”), that establishes clear reporting on a green bond’s environmental objectives and estimated impact.  Examples of project categories eligible for green bond issuance include renewable energy, energy efficiency, clean transportation, green buildings, waste water management and climate change adaptation.  ICMA has also created similar guidelines for social and sustainability bonds.

A growing percentage of GSS bonds issued in Asia are now aligned to recognized frameworks, such as those developed by ICMA, or the recently launched ASEAN Green Bond Standards, which are themselves based on the Green Bond Principles.  Nevertheless, investors need to do their own due diligence on the issuer and the use of proceeds, especially in markets where this asset class is less well established.

Benefits from better data

Where investors are successfully navigating these challenges, and quality data is available, demand for GSS bonds is in some cases well ahead of supply.  Here, bondholders may enjoy a “greenium”, where labelled bonds have lower overall yields compared to their conventional alternatives.  Some GSS bonds also experience stronger secondary market performance and offer more liquidity than their vanilla equivalents with the same risk profiles.

As regulators continue to push for greater transparency across the region, better data will help to reduce funding costs for issuers, deepen markets and create more opportunities for investors.

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