We interviewed Darian McBain, Chief Sustainability Officer of the Monetary Authority of Singapore (MAS). Darian has taken a broader perspective on the role of sustainable finance and is looking to build more partnerships and opportunities for collaboration in the sustainability ecosystem. In this edited interview with McKinsey’s Rebecca Abramson, Darian McBain talks about her sustainability journey and the role of MAS in unlocking sustainable finance in Asia.
McKinsey: What do you see as the top three challenges in Asia’s transition to net-zero emissions?
Darian McBain: I can see Asia’s transition to net zero being summarized in three “S” words. The first one is “speed.” We have a real challenge ahead of us to make sure that we accelerate the pace of change. We’re already seeing the impacts of climate change in this region and globally. How are we going to mobilize finance to help to accelerate the changes that we need, whether they’re on the ground in the real economy or within the financial systems, and how do we make sure that we’re moving in the right direction?
The next challenge for this region is going to be “skills.” We know that if we transition to a green economy, there are going to be jobs that don’t exist now. Or people might need to retrain to work in industries that are still developing. So how can we build up the skills and competencies of people within this region so they can really facilitate a transition to a green economy?
And the last word is “society”—the “S” of ESG. How do we make sure that we bring people along in this journey so that we have a just transition? Sometimes when you look at ESG, people look at the “E,” the environment, first—and particularly carbon intensity. But, all of these things link back to how we as a society will be sustainable into the future. So a challenge is making sure that people are at the heart of any of our solutions and putting that “S” first.
McKinsey: What do you think are going to be the greatest unlocks and enablers to address these challenges?
Darian McBain: Luckily, I’m working in the finance sector now because I think finance is one of the greatest unlocks that we can see in this region. Whether it’s through structured products that we can see now, such as green bonds or sustainability-linked bonds, or sustainability-linked loans. I think there are great opportunities to make sure that finance is flowing in the right direction and that it’s going to the projects that we need. Obviously, within this region, there’s a development of taxonomies to make sure that money flows toward green and sustainable projects. But there’s also a lot of work on projects such as transition planning.
Another unlock would be innovation. Asia as a region is used to being flexible and adaptable and there are a lot of innovative people here. How can the region channel its innovative mindset to solve the transition problem.
Finally, taking full advantage of the region’s ‘can-do’ attitude will be key to success. It’s going to take everybody from all parts of society to really work on these problems—climate change, energy transition, hunger, and other broad issues.
McKinsey: How is MAS thinking about sustainable finance and what is required to channel capital into a more sustainable future?
Darian McBain: MAS is working on sustainable finance from a number of different perspectives. In 2019, it released its Green Finance Action Plan, and that looked at a few key areas, such as regulation, data and disclosures, risk management—how to make sure that we have the right stress tests and risk assessment to enable the financial industry to be resilient to climate change risks.
As part of this plan, we developed MAS’s Project Greenprint to figure out how can we get better-quality ESG data for financial institutions—including MAS—to base their decisions on. The project brings together an ecosystem of regional players that allow ESG data to be used and accessed in a much easier way. It harnesses the power of technology—and, particularly, the fintech ecosystem, which is quite developed here in Singapore.
Finally, we are also looking at how Singapore can be a sustainable finance hub and bring all different people globally together to work on these challenges. We are developing 100 problem statements for sustainable finance to address pain points, and where can sustainable finance play a role in driving change.
To give an example, MAS has just announced a partnership with Google Cloud to work together on a climate finance accelerator at the ESG Impact Hub. The goal is to address the 100 problem statements, working with fintech solution providers to partner with 1,000 financial institutions to impact 10,000 companies. That really sets out the challenge and frames how we’re going to bring a lot of those different parts of the ecosystem together to collaborate to achieve a more sustainable future
In the near term, we will continue to focus on these collaboration and partnerships. When you have complex and constantly evolving challenges such as climate change, what you realize is that no one organization can solve these challenges. No one government can do it alone. No one company can do it alone. In solving these challenges, regional collaboration is key. Sustainability challenges don’t have borders; they are borderless.
McKinsey: What can we do to pursue green finance further? How has Project Greenprint helped accomplish this, and how has this initiative influenced your near-term goals?
Darian McBain: A good example of how we can use green and sustainable finance to mobilize capital is through blended finance. How do we bring public- and private-sector money together to be applied to some real-world problems and solutions? One example would be through infrastructure and perhaps carbon-intensive activities and coal-fired power stations. How can we use public and private finance to come together to look at the future of carbon-heavy activities, and how can we transition them to be more sustainable? No one company can do that by itself, but working together, we can have a much more accelerated approach.
MAS’s Project Greenprint seeks to figure out how can we get better-quality ESG data for financial institutions—including MAS—to base their decisions on. The project brings together the ecosystem of all the players that create ESG data to be able to use it and access it in a much easier way. It harnesses the power of technology—and, particularly, the fintech ecosystem, which is quite developed here in Singapore.
An example of one of Project Greenprint’s focuses is looking at the ESG registry, which is now called ESGpedia. It accesses real-world data for certifications and understanding real economy sectors. To give an example, it works with certification schemes such as the Roundtable for Sustainable Palm Oil or the Aquaculture Stewardship Council to get the real-world certification data so that financial institutions can make better decisions about what activities are sustainable. Another aspect of MAS’s Project Greenprint is using technology to enable people to report their data more simply. ESGenome is a project that allows people to report their ESG data once but then makes it available to be used for different outputs. It could be compliant, for example, with the data requirements of the IASB [International Accounting Standards Board] or International Sustainability Standards Board [ISSB] when they’re released. The focus is facilitating better disclosures by looking at the key pieces of information that companies need to report and enabling those companies to report the data once.
We’re also looking at how Singapore can be a sustainable finance hub and bring all different people globally together to work on these data challenges—whether it’s the 100 problem statements for sustainable finance or the really detailed, granular data that you can get from this region for problems that are unique to this region.
In the near term, I think that we need to focus on these collaboration and partnerships. When you have really complex challenges such as climate change that are constantly evolving, what you realize is that no one organization can solve these challenges. No one government can do it alone. No one company can do it alone. And so how we collaborate and work across different aspects of society is very important. In the near term, I really want to focus on how we build up those collaborations.
This interview is part of an ongoing series on Shapers of Sustainability, where we convene leaders on sustainability to discuss challenges and opportunities in the Asia-Pacific region’s transition to net-zero.