ESG round-up: Singapore and China launch joint green finance taskforce

The latest developments in sustainable finance: Korean FSC to reform remuneration system; IOSCO welcomes IAASB’s early consultation on sustainability assurance standard.

The Monetary Authority of Singapore (MAS) and People’s Bank of China (PBOC) have launched a China-Singapore Green Finance Taskforce (GFTF). The taskforce will further cooperation on transition finance between the two countries, as well as facilitate greater public-private sector collaboration. The GFTF plans to establish three workstreams. The first will focus on taxonomies and definitions to achieve interoperability between the Singapore and Chinese taxonomies by using the International Platform on Sustainable Finance’s common ground taxonomy. The second will look at products and instruments for transition bonds. The Singapore Exchange and China International Capital Corporation will establish a group to strengthen sustainability bond market cooperation between the two jurisdictions. The final group will focus on technology to facilitate the adoption of sustainable finance, including piloting digital green bonds with carbon credits. The Metaverse Green Exchange and Beijing Green Exchange will collaborate on this.

Staying with China, the Asia Investor Group on Climate Change (AIGCC) has launched a working group for the jurisdiction in response to growing interest from investors. In the first year of its launch, the China working group will be open to Chinese investors who are not currently AIGCC members to encourage broader discussion. The other existing groups include: energy transition, engagement and policy, forest and land use, Japan working group, Paris aligned investment, and physical risk and resilience.

The Korean Financial Services Commission (FSC) is planning to reform the performance-based remuneration system in the industry. In a meeting last week, the regulator discussed improving the system by increasing the minimum deferral rate for performance-related pay from 40 percent to 50 percent, and the deferral period from three to five years for executives and financial investment managers. It also suggested introducing a “say-on-pay” mechanism for shareholders to be able to influence individual remuneration plans for executives. The FSC is looking to increase transparency and accountability of compensation practices for executives, including performance bonuses and voluntary retirement payments. It will finalise its plans on the reforms after consulting with experts and stakeholders.

Staying on pay, CEO pay rises are tapering, according to analysis from ISS Corporation Solutions (ICS). The research analysed CEO pay changes at S&P 500 companies that filed proxy statements between October 2022 and April 2023. The ICS analysis, which examined a total of 337 US large capital companies, found a median CEO pay increase of 3.1 percent between the 2022 and the 2023 filing period, compared with a median pay increase of 13.2 percent for the prior year. The median base salary for an S&P 500 CEO was $1.3 million in 2023, representing a median increase of 2.9 percent compared with 2022. Bonus and annual incentive payouts decreased compared to the previous year, with a combined median of $2.59 million, representing a decline of 5.4 percent.

The Hong Kong Monetary Authority (HKMA)
has set out enhancements to its climate risk stress-testing framework. They include the introduction of a new five-year scenario, further assessment requirements, and more detailed reporting requirements. The amendments will come into force for HKMA’s second round of the climate risk stress test due to start in June.

Financial institutions are making slow progress on gender balance, according to the Official Monetary and Financial Institutions Forum’s (OMFIF) gender balance index report. The index – which scores companies based on the ratio of women and men in their senior staff, while giving greater weight to more senior positions – analysed central banks, pension funds, sovereign funds and commercial banks, and found that 27 percent of institutions saw their overall score decline. Fourteen percent of the 336 institutions assessed in OMFIF’s gender balance index have women leaders, unchanged from 2022. Meanwhile, 27 institutions reported zero women in their senior staff, with only 19 having more women than men in senior roles.

The Science Based Targets initiative (SBTi) has updated eight of its key resources that enable companies to set and commit to science-based emissions reduction targets. Resources that have been updated to increase transparency and accountability include the commitment letter, corporate net-zero standard and criteria, and near-term targets criteria.

UK financial institutions are gradually disclosing their maternity and paternity leave policies, according to research from the Diversity Project, an initiative designed to promote DE&I in the investment and savings industry in the UK. The report found that 31 financial institutions now offer 26 or more weeks of maternity leave at full pay, with 42 also offering more than two weeks fully paid paternity leave. Thirteen firms also disclosed their carer policies.