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  4. Episode 21: ESG and Long-Term Planning

Guest speaker:

Helene Li, Founder of GoImpact

ESG and Long-Term Planning Can Play a Pivotal Role in the Post-Crisis Recovery

Episode 21 | Duration: 15 minutes

What role ESG funds, long-term planning, and sustainable funds will play in the post-crisis recovery? How can they help us prevent similar economic and business shocks?

  • Keesa Schreane [00:00:00] We're hearing a lot about the new normal. What does the new normal look like and when will the new normal kick in? Well, let's look at the new normal in the context of ESG investing. How can ESG investing, sustainable investing, impact investing help us get to that new normal? And how can that really help to establish what this new normal looks like? Here to share insights is Helene Li, co-founder of GoImpact in Hong Kong. Helene, thank you so much for joining us. .  

    Keesa Schreane [00:00:38] So could you share with us, first of all, what does the new normal look like for you? How are things going in Hong Kong? What are you seeing with the investment community there? And then more broadly, beyond just what is being discussed in Hong Kong around the new normal? How do you feel that that is relevant in terms of the new normal for global ESG investing?  

    Helene Li [00:01:01] Yeah, actually, I like the term new normal because it by definition is that is not the same old world as we are expecting to go back to before the corona crisis. And I think that is very true. What we are seeing in Asia is that the whole shift in terms of both processes and mindset. There are certain things that we might be able to revert back to the familiar world before COVID. But there are certainly other things that probably will be here to stay, such as remote working, such as the pace or the accelerated pace of digital transformation. And I think within that probably ESG plays a very significant role in terms of filling or bridging some of the gaps that we are seeing. You know, we talked a little bit about how the Coronavirus actually exposes a lot of the cracks in our systems, whether it be in our values, in our business models and in the whole way in which we go about doing business or investing. And more and more people are looking at risk mitigators. And I think through the ESG lens investing is a very real risk mitigator. And there could be a whole shift of momentum behind all this.  

    Keesa Schreane [00:02:21] So as we move forward, we are talking a lot about how ESG funds could perhaps prove to be more resilient during downturns, but we're not just talking about downturns here. We're talking about a new normal. A complete new normal. So in terms of the risk mitigators, could you talk specifically about how the risk mitigation piece will factor into what life looks like post-covid? 

    Helene Li [00:02:47] Yeah, actually, you know, for investors, there's always risk and return. And I think probably what this exposes is that companies that are more resilient are typically companies that do better in terms of environmental, social or corporate governance. And all these factors will increasingly come into the forefront. I think both driven by the regulators, as we talked about earlier, but also by the crisis in that these companies probably should be carrying a heavier weight in terms of the overall portfolio of the investors. So probably that's the angle where risk mitigation comes in and actually be accelerated through the crisis.  

    Keesa Schreane [00:03:34] Let's take a look at how this outbreak and other phenomena are causing global firms to take a look at the interconnectivity of markets. What have we learned, Helene, about the interconnectivity of the markets due to recent events?  

    Helene Li [00:03:49] I think we did the coronavirus exposes a few major cracks in our system all over whether it be in the market or actually it is in the whole infrastructure and connectivity of our businesses. I think beyond Wall Street, we're also looking at supply chains are being disjointed. If production doesn't step back up, it's going to affect more than investors. We're looking at goods not being able to be produced and delivered on time. So what that actually exposes, I think is a very strong wake-up call for us to take a probably mid-term as well as longer-term view of things, which is actually awfully difficult for the financial industry, coming from the finance industry myself. We are judged from quarter to quarter, but I think all of these are very serious wake-up calls for us to take a slightly longer-term view of how we go about doing our businesses.  

    Keesa Schreane [00:04:51] So when you're talking about the wake-up calls, which that's a very great term, I'm looking at the markets specifically and we can look at China and a lot of folks are predicting, the optimistic folks are predicting that maybe a V-shaped recovery is expected. What are you seeing on the ground in Hong Kong? What are you hearing about China as it relates to fintech or even the broader markets?  

    Helene Li [00:05:16] Well, actually, you know, it's not all, you know, pessimistic view. I think some sectors actually have done better in the current environment. We are faced with really the largest work from home experiment the world has ever seen. And with that comes a lot of remote working from remote kind of tools or, you know, online tools, whether it be financial tools or other connectivity solutions. It really helps us to revisit the whole scenario, I think it varies, but enough to say that whether Deliveroo will has done more business because people are more confined to eat at home or some e-learning has done much better because we are, you know, sort of limited to online learning. I think everybody just, you know, suffers quite a bit from the current situation.  

    Keesa Schreane [00:06:19] Yep. So if there some to prevent future issues from having as much of an impact, obviously there's always going to be an impact when you have something of this magnitude. But to prevent it from having as much of an impact, what are, say, the top three questions that leaders should ask themselves now to be ready to respond to these things in the future? You mentioned one great one, which is the work from home theory moving fought with that. What could top the top three things be that leadership should start asking themselves to prepare in advance?  

    Keesa Schreane [00:06:51] I think it's not just focused on the Coronavirus. You know, it's definitely something that looms really large right now. But if you look at responsible leadership or sustainable leadership, you are looking at investing in your people, investing in a business model that actually contributes to a long-term success rather than sacrificing the mid-term needs for short term gains. So all those different perspectives in which I believe investors, as well as manufacturers and people in different industries, are really looking at the whole momentum shift towards sustainable finance. It's very much there. I mean, according to Refinitiv data, last year in 2019, there's like twenty point five billion net inflows into ESG funds. And I think that is a significant momentum of the capital markets to reckon with.  

    Keesa Schreane [00:07:51] Great. So let's continue the conversation about short-term or either mid-term performance versus long-term performance. If we have leaders who actually have to look at performance numbers, but then need to reconcile that with more long term impacts in terms of what can promote longevity of the business and what can promote sustainable businesses. What are some of the two or three things that you think leadership should look at; either questions they really need to ask themselves in order to reconcile those short-term performance goals they have to meet on the street versus some of those long term goals that really have to do with longevity and making a positive social impact.  

    Helene Li [00:08:29] I think it's not a trade-off. I don't think we can look at it in a simple way, like, oh, do I trade off short term gains for mid-term benefits? I think it's more a sense of, you know, the whole value creation and staying true to your value creation. After all, there won't be any business if we don't have customers and having our customers meet at the forefront, I think without compromising on that, it's really at the heart of value creation. It's at the heart of a successful business. I think it's more than just a trade-off. It's really staying true to your value creation process in terms of value creation.  

    Keesa Schreane [00:09:12] I like that because it really looks to take the emotion out of it and really focus on how ESG investing, sustainable investing can really benefit in terms of the markets as well. Tell us, Helene, what are you seeing on the ground in Hong Kong that really differentiates the way that Hong Kong is approaching impact investing, sustainable investing versus the rest of the world? What's unique?  

    Helene Li [00:09:35] Well, yeah, think it's not just Hong Kong, but more Asia where. Asia is sort of lagging behind a little bit in terms of adopting sustainable finance. Not really for a lack of intention, but I think really a kind of lack of actionable momentum if you like. I think, you know, the private investors, family offices and so on are always looking out for new product offerings beyond the green bond, beyond, yes, ESG funds. They're looking at new ways in which sustainable investment opportunities tend to factor into their overall portfolio or can be increased in the overall portfolio. And for that to happen, I think there are quite a few gaps that we need to be addressed, part of which is an investor education gap. People need to understand exactly what's out there in the investable universe and also in terms of the intermediaries, the finance industry. You know, they need to work together with capital owners to be really good partners in terms of enabling them to move their investments towards a more sustainable portfolio as they want to.  

    Keesa Schreane [00:11:00] And let's talk a bit about regulation and some of the regulatory issues that you're seeing going on right now in the Asia region.  

    Helene Li [00:11:07] Sure. I think it's not so much of the issues, Keesa, as there's a huge tailwind from the regulators in Asia. At least they are pushing the sustainable finance agenda forward. So I think that's part of the whole momentum shift that we are seeing in the past couple of years from the stock exchange that really regulates all the listed companies on the stock exchange, pushing for more and more disclosure for listed companies around their sustainability reports. So beyond just the annual reports, there is now increased pressure on them for quarterly disclosures. And I think that really takes it to a whole new level of sustainability kind of input from the listed companies. On the other hand, the monetary to authorities are also looking at sustainable finance as beyond an alternative agenda. How do the mainstream finance institutions onboard that and embrace that? So we know from Singapore to Hong Kong and other monetary authorities, they are really embedding this very much into a whole range of how they look at things. So I think this is also part of the pressure, if you like, the tailwind in which regulators are really pushing the industry forward and also reacting, I think, in part to a lot of the demands from capital owners. And in Asia, we see a lot of pent up demand from capital owners for this.  

    Keesa Schreane [00:12:36] And so in terms of the response, we hear that the tailwinds are happening. The regulations are happening. What is the response that you're seeing from industries and corporates? Are they taking it all in stride or are there other types of responses that we're seeing?  

    Helene Li [00:12:50] I think they are reacting very positively. I mean, this is not really something they will say no to. But it just means that the bar is being raised in terms of disclosure, in terms of doing something. Increased robust kind of offering around sustainable finance. The bar is definitely being raised. And I think the regulators are part of the community that is working on that query to lean.  

    Keesa Schreane [00:13:18] And just to wrap up, if you could point out, I use the word that the words the seed of good could possibly come from the pandemic as it relates to ESG, as it relates to how investors may be embracing ESG. What positives do you see? What changes do you see coming from this after 2020?  

    Helene Li [00:13:42] I think it's a combination of the fear factor as well as the long-term view. So the crisis actually has, you know, put the fear factor right in people's faces and that actually has the halo people realizing that you need to take a slightly longer-term view in terms of both the way you do business and the way you invest. Probably that would be the seed of good in a nutshell, perhaps.  

    Keesa Schreane [00:14:13] Great. Well, Helene, thank you so much for your time and thank you for your great insight on this.