Growth of ESG in the Philippines
Panel session at the 14th Philippine Forum highlights the shift of companies looking at sustainability
10 Feb 2020 | Darryl Yu
FROM India to South Korea, conversations about ESG (environmental, social and governance) and sustainability within companies have been on the uptrend in Asia. Besides just looking at financial performance, companies in the region are now starting to think about their impact on stakeholders and society in general.
This development has started to take form in the Philippines, which has seen ESG milestones in the financial services as companies invest more in renewable energy or seek financing via green bonds.
Looking to further investigate this drive towards ESG, The Asset’s 14th Philippine Forum featured a panel where several experts shared about their respective companies’ journeys in embracing ESG. For them, elements of ESG practices had already been part and parcel of their company operations for many years but were only brought into the limelight recently due to the increase in awareness and demands from investors.
According to Timothy Daniels, head of investor relations, consultant at SM Investment Corporation, their ESG reporting process began around five years ago when some investors started requiring it as part of their investment evaluation process.
“I remember getting a letter from a Dutch pension fund six years ago saying that they really loved our company but due to pressure from their board, they would only invest in companies that produced an ESG report,” recalls Daniels. “Big institutional investors want to see this kind of transparency and priority in your business.”
It was a similar situation for Del Monte Philippines, according to Ignacio Sison, the company’s chief corporate officer, as embracing ESG meant they also became more attentive to the changing consumer needs of their customers who often are now more aware of the source of the products they consume.
“Day-to-day our people in the plantation have to be very mindful of what needs to be done to manage our impact on climate change whether it is soil management or even clearing up the drainage,” shares Sison.
While simple in theory, becoming an ESG-focused company involves a fair deal of internal adjustments, according to the panelists. For example, in the case of financial institutions such as China Bank, that involved taking a closer look at the activity on their loan books.
“Before you were measuring the impact of your loan on two entities - you were measuring the customer and the cost to shareholders. Now, you are measuring the impact on society,” says Alex Escucha, head of investor and corporate relations group at China Bank. In an effort to push the bank’s ESG developments, China Bank last year issued a US$150 million green bond with IFC (International Finance Corporation) as the sole investor to support the bank’s green projects.
For SM Investment Corporation, the challenge with reporting their ESG activity was being able to streamline their message and make sure that the relevant information was highlighted in their annual sustainability report.
“Seeing the wood from the trees is the challenge but so is realizing that by doing this process, you will gain a lot of credibility,” explains Daniels. “We didn’t know half of what we know today before starting this. A big part is figuring out what is material to your business. If you have an ESG or sustainability mindset, it makes it easier to focus on what is really important.”
Regarding some of the benefits of embracing a sustainability approach, participants on stage agreed that being more aware of ESG could help in mitigating long-term risk. “You can avoid, for instance, the risk of legal disruption by complying with regulatory requirements. As a food company, we don’t want to get into the crosshairs of some government agencies,” notes Sison.
Likewise, Daniels believes that incorporating ESG standards can clarify matters and make people in the organization think about the long-term sustainability vision of the company. “What all these ESG frameworks, measurements and rating agencies are doing is really assessing the way you think,” observes Daniels.
While businesses in the Asia- Pacific region, including the Philippines, continue to enhance and refine their ESG activities internally and externally, the bigger question will be if these organizations are able to influence and motivate the stakeholders they work with to adopt more sustainable practices. This is already happening in a few fields such as financing, where several banks have begun providing incentive-based financing for their clients that hit pre-determined ESG goals.