Corporate Stewardship – Purpose and Profits
Thank you to UBS for inviting me to be a part of this flagship conference, and to share my thoughts on a very apt topic on corporate stewardship.
As a CEO and director of several boards, I believe that board directors and senior management should see themselves as company stewards who are responsible not just for the company’s financial performance, but also its sustainable, long term future.
When we see ourselves as stewards, it is apparent that our responsibility is to grow the assets that we have been entrusted with, and ensuring that these assets can be handed over to the next generation in better shape.
Stewardship is multi-dimensional. It involves integrating short- and long-term decisions, growing both tangible and intangible assets. It also focuses on all stakeholders, as well as the environments that we operate in.
With a stewardship mindset, the essential elements of environment, social and governance will fall into perspective, and will drive our decisions and actions. Board diversity or sustainability, for example, will no longer be nice-to-haves but must-haves.
As stewards, we will know that not all growth will be good growth, if the price of growth compromises the society, the environment, or the company’s reputation for that matter.
Ultimately, all companies want to do good and do well. We have read and heard a lot about purpose and profits. Whether it is purpose that drives profits, or seeking purposeful growth, I believe both purpose and profits go hand in hand.
Purpose-driven
Let me touch first on purpose, using SGX as an example.
As Asia’s leading and trusted market infrastructure, SGX facilitates the exchange of capital and ideas to create value for people, businesses and economies. Value to us is not just about profits. It is value seen through the eyes of our stakeholders and our ecosystem.
Sustainability has always been a board agenda at SGX. We are focused on ensuring the longevity of our ecosystem, delivering long-term value for our stakeholders, and creating a positive, lasting impact on society.
Today, there are two major risks and disruptive forces that everyone is concerned about – the ongoing global pandemic and climate change. Climate change, in particular, is pervasive. Southeast Asia is highly vulnerable to rising temperatures and sea levels. Agriculture and natural resources are key industries in this region, and we have large population and economic activities along coastlines. In Singapore, climate change poses an existential challenge.
Climate action is a key priority for us. SGX is committed to taking climate action, in our role as a key player in the ecosystem, as a company, a business and as a regulator.
In the ecosystem, we see our role as a positive influencer, collaborator and convener of partnerships. To move the needle in climate change, we need everyone to work together. By fostering collaboration and partnerships, coupled with data, resources, and knowledge, we can further build capacity and mobilise everyone into action.
We want to be a holistic partner for companies as they seek to reduce their greenhouse gas emissions. We have just launched a guide on credible decarbonisation and transition for senior corporate leaders and industry practitioners. Corporates play a significant role in reducing greenhouse gas emissions globally. The guide helps them to contextualise the range of climate action initiatives, and provides a set of actionable climate mitigation steps.
As a company, SGX has been on the sustainability journey for many years, and we must continue to show leadership. We are aligned to internationally accepted carbon mitigation hierarchies. Moving forward, SGX will adopt TCFD guidelines in our sustainability reporting and plan to set our own science-based targets for greenhouse gas emissions.
Next, as a business, SGX will continue to offer an innovative suite of ESG solutions to support our customers with relevant investment and risk management solutions across multiple asset classes, including indices.
And finally, our role as a regulator. We strive to guide the market on sustainability-related disclosures, enhance transparency in the markets, and provide the necessary tools and data for investors to make informed investment decisions. SGX has encouraged companies to adopt TCFD’s recommendations and will be consulting the market on including it as part of our ESG disclosure requirements.
Sustainable profits
Next, let me touch on sustainable profits. SGX is committed to facilitating economic growth in a sustainable manner. In this regard, I believe that SGX’s aim to be a leading sustainable and transition financing and trading hub complements our desire to deliver long-term profits to our shareholders.
SGX has built a unique international multi-asset platform that serves the needs of market participants seeking opportunities in Asia. We have diversified into multiple asset classes, covering equities, fixed income, currencies and commodities, serving clients with end-to-end solutions.
We have, and will continue to, acquire strategically, partner, and build. As a group, we are now well-poised to capture the cyclical and secular trends that we see ahead of us.
SGX’s multi-asset strategy provides dexterity to meet cyclical trends whether in the current low interest rate environment or rising inflation .
At the same time, secular trends like ESG, digitalisation, passive investing and Asia leading global growth, present growth opportunities for SGX.
Specifically on ESG, SGX continues to expand our offering of trusted, quality, end-to-end ESG products and solutions.
As corporates look to reduce their carbon emissions, we want to support them in their financing through our suite of products such as green bonds as well as hedging tools via our ESG derivatives. Our subsidiary, Scientific Beta, has launched its Climate Impact Consistent Indices or CICI – a unique series of pure climate indices that translates companies’ climate performance and alignment engagement into portfolio decisions.
Once companies have significantly reduced their absolute emissions, they will look at neutralising their remaining carbon emissions via high-quality carbon credits. In this regard, we have recently announced a joint partnership with DBS, Standard Chartered, and Temasek to launch Climate Impact X – Asia’s first global exchange and marketplace for high-quality carbon credits. This will be one of the ways to help corporates address hard-to-abate emissions.
From avoiding and reducing emissions within companies’ operations and value chains, to using renewable energy sources wherever possible, and finally neutralising and compensating, we will work with our ecosystem throughout this sustainability journey.
Conclusion
SGX has been rewarding our shareholders with a growing and sustainable dividend, in line with our long term growth prospects. At the same time, we have placed sustainability as one of our key priorities. I believe this is testament that purposeful and sustainable profits are within a company’s reach.
I hope my short sharing will encourage all of you to consider your company’s purpose and pursuit for a sustainable future. I look forward to discussing what I just shared with my chat with Christian. Thank you!
