Task Force member Piyush Gupta, chief executive officer of DBS (Singapore) also serves on the advisory board of the Sustainable Digital Finance Alliance. SDFA’s just-released report on sustainable digital finance in Asiawill be much discussed during Davos 2019, including during the Task Force’s inaugural meeting.
By Piyush Gupta, Group CEO DBS
Asia finds itself with a perplexing dilemma. Although impressive economic growth over the last decade has lifted millions out of poverty, most countries in the region still struggle to meet basic social needs, such as education and access to energy and clean water, for their entire populations. However, if the region’s expected future economic growth follows the same trajectory as that of now-developed countries in other regions, the world is likely to overshoot its planetary boundaries even more profoundly than might otherwise be the case. We are only now starting to truly grasp just how interlinked social and environmental problems. Resolving them will rely to a large degree on our ability to understand and address these perceived polarities.
Digitalization and the effective use of new data holds many promises for deciphering the interconnections of social and environmental issues. In the financial sector, much focus has been applied to the question of how digitalization can help solve social problems – including the aiding of social inclusion by lowering the costs of making transactions and servicing customers. It creates opportunities also to better service small and medium enterprises (SMEs) – the growth engine of many parts of Asia. I personally see this work as a preeminent opportunity for banks in Asia to fulfil a calling of purpose beyond profit.
However, digitalization also holds significant opportunities to resolve environmental issues, not least by helping redirect financing towards more environmentally efficient users of capital. New abilities for obtaining and analysing data at scale and at speed vastly enhance opportunities to incorporate environmentally-relevant information into risk analysis and asset pricing. This in turn changes the cost of capital for companies in the real economy. It also enables predictive analytics and portfolio insights that in turn can change banks’ portfolios and offer insight into banks’ overall environmental footprint.
The report, produced by DBS in collaboration with the Sustainable Digital Finance Alliance (SDFA), provides six specific recommendations for banks to consider as they engage a rapidly digitizing world. These recommendations range from integrating digital technologies into existing financial products to the development of entirely new products and services both in-house and as part of external and rapidly evolving technology ecosystems.
As the enormity and immediacy of the environmental threat to citizens in Asia (and elsewhere) becomes increasingly apparent, I am convinced that the need for reliable and understandable environmental data is becoming exponentially more important. This need will drive policy decisions, and its fulfillment will help distinguish tomorrow’s leaders and corporate citizens. I am convinced that banks which proactively obtain, embed, and utilize environmental data will gain advantages not only in risk management and performance, but also through an enhanced ability to serve society in new and impactful ways.