Here’s an excerpt from the podcast:
Andrea Heng:
So what kind of investor will green finance or transition finance suit most?
Prof Lawrence Loh:
To put it in one sentence, it’s for the investors who want their cake and eat it … So in other words, you still have your requisite rates of return, your ROI, because … ultimately whatever investment, by definition, is something where you need a certain payback to you, including a certain surplus. But the other side is, I think investors are also beginning to see that they play a role in moving society, moving even towards better protection of the environment. And I think if they can do it together with what they call the financial return, all the more it’s better. And I think lately, the various classes of green instruments are now living up to some of these promises.
Andrea Heng:
Yes I’m glad you brought that up. You’re an expert in this field, so I wanted to get your observations on the industry. It’s not entirely new. It’s new to many of us, individuals, the average person. How has it performed? Has there been real impact from green finance and transition finance in meeting some of these climate change related goals that we keep talking about and hearing about in the news?
Prof Lawrence Loh:
Yes, I think if you look at, say, green finance, it is actually not just being nascent now. It’s actually turning the embryonic curve towards something that is developing quite fast if you look at environmental-based finance. Another one which is actually not quite environment is social-linked (finance). But of course, these two can be lumped together and then generally (be known as) sustainability-linked (finance). This part is, I think, quite well nurtured, and they are actually keeping up with, I would say, the conventional finance. But the one that’s still taking baby steps is really transition finance. And I think individual investors won’t know what to do with them, because they are actually very complicated. You are funding, say for example, entities that are trying to move away from firing their energy generation from coal.
Andrea Heng:
And that’s hard. That’s hard to do.
Prof Lawrence Loh:
It’s hard so I think that the retail investors or individual investors need to get to the game. I think it’s not too easy because understanding transition is actually more difficult than understanding the finance. So in transition finance, the key thing is really the transition, not so much the finance.
