Carbon accounting, while daunting, enjoys a common unit of measurement in tonnes of carbon dioxide equivalent, or tCO2e. Impact investing, which counts a variety of causes among its beneficiaries, is much harder to quantify.
There is currently no perfect solution, and the nascent sector is not ready for regulation, says Koh Lin-Net, institutional relations lead at Temasek Trust. “I think we need to sort out the measurement question first. Even if I had my number, how do I compare my number with somebody else’s number? There are many issues about that, and if we can’t calculate or we can’t agree on a measurement system, I think regulation may give rise to perverse outcomes.”
Speaking on a panel at the seventh annual Global Research Alliance for Sustainable Finance and Investment (GRASFI) conference on Sept 2, Koh says the cost of data gathering is another concern. “It's extremely expensive. We have to look for funders to support our research projects.”
Koh, also a director at the two-year-old nonprofit Centre for Impact Investing and Practices (CIIP), cites the work that went into a 2023 report on financial inclusion across Southeast Asia. Conducted in partnership with the United Nations Capital Development Fund (UNCDF) and Helicap, the study received contributions from 60 organisations and their 6,500 customers across five countries: Cambodia, Indonesia, Myanmar, the Philippines and Vietnam.
New York-headquartered impact measurement company 60 Decibels supported the study, and the resulting report, titled “Financial Inclusion in Post-Covid Southeast Asia: Accelerating Impact Beyond Access”, was released in June 2023 as the first-ever impact-focused financial inclusion report in the region.
“We paid for it as a centre. I mean, we cobbled our funding together,” says Koh. “I think if you wanted companies to do it one-by-one with third party verification, it [would] be too expensive. So, I think the academic community would really benefit everybody if you could help us solve this, you know, how to get to the data in a cheaper way.”
See also: Investing for impact? Learn these lessons from ESG investing
In turn, the moderator of the panel, Associate Professor Liang Hao of the Singapore Management University (SMU), quips: “I have to say, I’m not sure whether we are cheaper, as researchers.”
Koh adds: “Sorry, I didn’t mean to say cheaper, but to use technology to find it, you know, to get to that data.”
See also: Academia, industry should work with government to advance sustainable finance: DPM Heng
From left: Associate Professor Liang Hao, Singapore Management University; Koh Lin-Net, institutional relations lead at Temasek Trust; Eleanore Dachicourt, managing director and head of sustainability, Asia, wealth management at BNP Paribas Asset Management; Michael Fernandes, investment partner, LeapFrog Investments; and Vikas Arora, chief of impact investing at AVPN
Not patient enough?
Patient capital is a term used to describe long-term investments, typically into humanitarian issues such as access to healthcare, water or housing; where sustainable growth is prioritised alongside financial returns.
Projects with longer time horizons have greater potential to create additionality with their impact, says Eleanore Dachicourt, managing director and head of sustainability, Asia, wealth management at BNP Paribas Asset Management. “That's why when you look at different impact strategies, they are typically illiquid solutions, private equity [or] private market funds.”
But is this patient capital patient enough, asks Liang, who is also co-director of the four-year-old Singapore Green Finance Centre (SGFC).
In this part of the world, investors are “probably not as patient” as in Europe or in the US, says Dachicourt. She chalks this up to investor education around alternative investments, especially towards family offices.
“Focusing on that performance potential is still very key to this part of the world, especially [with] family offices. A lot of the wealth here has been created from businesses; it’s still first- or second-generation wealth. And so, they’re still very much focused on how to grow that wealth, as opposed to preserving that wealth. That’s why sometimes, the patience is not always there,” she adds.
See also: Singapore announces Asia-focused blended finance initiative Fast-P with US$5 bil target fund size
Few and far between
Blended finance is the flavour of the month, says Vikas Arora, chief of impact investing at AVPN, Asia’s largest network of social investors. “Every conference and every panel that you go to, there is discussion of blended finance.”
The financing structure first welcomes “cheaper” forms of funding, often from the public sector, which then help attract private capital into projects that are deemed risky or less profitable.
“For a financial professional, it absolutely makes eminent sense that you bring in patient capital, get the project off the ground and then you crowd in private capital to scale it up,” he adds.
However, this has been easier said than done. “Look, it’s not easy to put to bear,” says Arora. “We haven’t seen too many transactions; it’s not something that's commercialised. There are a few examples of such transactions actually, but they’ve taken years literally to put together.”
The bottleneck here is, once again, measurement. “The one component that is very critical to any blended finance transaction is, again: What are the outcomes? Who’s measuring it? What's the definition of that? When do returns actually kick in?”
This may be “complex” to put together, but Arora says the panel’s role as “ecosystem-builders” is to “bring in the players and try and syndicate a solution”. “That’s what we are focused on.”
The Singapore government announced at COP28 in December 2023 that it would launch an “Asia-focused blended finance initiative”, along with a target to raise US$5 billion ($6.67 billion) for green and transition projects.
Senior Minister Teo Chee Hean said then that the government is prepared to contribute “catalytic capital” in support of the partnership, known as Financing Asia’s Transition Partnership, or Fast-P. No details have been released since.
GRASFI, the organiser of the conference, is an agreement by more than 20 universities worldwide to promote and share high-quality research in sustainable finance. Member universities include Yale University, the London School of Economics and Political Science, Imperial College London and the University of Oxford. The previous edition of GRASFI was held at Yale University in Connecticut, US, in August 2023.
This week’s conference marked the first time GRASFI convened in person in Asia. Over three days, the seventh edition of the conference — themed “Fostering credible transition, creating sustainable impact” — showcased 45 paper presentations, shortlisted from a record number of 220 submitted papers.
Deputy Prime Minister Heng Swee Keat delivered a speech prior to the panel, where he said Singapore’s academics and industry should work with the government to improve regulation and skills around sustainable finance.
Photos: SMU
