Professor Steen Thomsen of the Center for Corporate Governance, Copenhagen Business School, opened the floor with a question about what Environmental, Social, and Governance (ESG) is. The magnitude of ESG’s influence is staggering, with a financial footprint of $46 trillion, which rivals the global GDP, even compared to the scale of the Second World War. Professor Thomsen explained the rapid ascent of ESG investments globally, growing at a staggering 12.9 percent per annum, according to PwC 2022 reports. Professor Thomsen explained the importance of materiality; what is material for one entity may not be so for another, albeit recognizing the need for deeper scrutiny when using ESG as measurement. “What is material for a farmer is not the same. A farmer doesn’t need energy, so energy and carbon are not material to them,” said Professor Thomsen. Professor Thomsen added that the net zero transition is not confined solely to climate goals but encompasses the broader spectrum of Sustainable Development Goals (SDGs). Climate is just one facet of this expansive narrative. The Dark Side of ESG While ESG brings about transformational change, complexities and challenges remain. The need for impact reporting is underscored, though it’s acknowledged that a significant portion of these reports may be non-material. Despite its prominence, ESG remains enigmatic. Professor Thomsen noted that ESG funds often lack a precise definition, making it challenging to discern its transparency. A notable aspect of ESG is its inability to quantify goodness, raising questions about how ESG should be measured. Professor Thomsen views ESG as a guideline for the future, a sentiment shared by the finance community. The professor, however, pondered why companies are so enamored with ESG. Conversations with sustainability banks unveiled their strategies, which revolved around swiftly inventing ESG-related metrics. He proposed a solution: “We are going to have financial reports which will be audited and abided by certain standards; investors should look at the figures and not the ratings if they think climate is important,” he said. In addition, Professor Thomsen called for a shift from ESG to sustainability. He argued that ESG is insufficient for navigating the complex sustainability landscape, where the materiality of issues differs widely across industries and entities. In conclusion, Professor Thomsen emphasized the importance of focusing on materiality, risk assessment, and comprehensive reporting. He acknowledged the complexity of these issues but urged all stakeholders to embrace and address them. After Professor Thomsen’s talk, Dr. Soraphol Tulayasathien (Senior Executive Vice President, Head of Corporate Strategy Division, The Stock Exchange of Thailand), Dr. Suracha Udomsak (Chief Innovation Officer and Executive Vice President- New Business of SCG Chemicals), Professor Ellie Chapple (Professor of Accounting at QUT Business School, Brisbane, Australia), and Mr. Sam Hon (Founder and CEO of CREX) joined in a panel discussion on ‘Achieving Net Zero: Sustainable Finance Strategies for Climate Change.’ Speaking from the perspective of the Stock Exchange of Thailand (SET), Dr. Soraphol emphasized the importance of having data to achieve ESG goals. “Investing without data is like praying,” said Dr. Soraphol. To ensure the availability of dependable data, SET introduced the SDG Data Platform, which has a participation rate of 74 percent and involves 580 companies. However, when it comes to carbon footprint data, only a fraction of the needed information is currently available. The pressing question is how to reduce the associated costs and make the analysis process more economical. Hon echoed a similar sentiment that companies are rushing into investment without going through the necessary steps of carbon reduction, outlining effective ways companies can reduce their carbon footprint. “You can’t go straight into reduction; you must have measurement first,” warned Hon. He outlined steps that companies can follow to create a net zero transition, which is selecting a standard way of measuring carbon footprint using digital software and setting clear targets: “The first step is to establish clear and measurable net zero emission targets. Companies should define specific goals, such as ‘achieve net zero emissions by 2050,’ and break them down into intermediate targets,” he said. Dr. Suracha gave another perspective from SCG. As a company that produces cement, efforts to reduce a material’s carbon footprint may be limited, so SCG’s focus is primarily on improving the efficient utilization of materials. “We are exploring the concept of circularity, where waste from construction can be repurposed into reusable materials,” he said, adding that all industries rely on energy, and transitioning to clean energy sources poses significant challenges. While SCG cannot lead in nuclear power, it heavily utilizes heat batteries to convert electrons into heat, reducing their dependence on fossil fuels. In SCG’s commitment to sustainability, it prioritizes addressing petrochemicals, carbon, and fossils and exploring biomass, announcing plans to convert 200 million units of propylene into ethanol, contributing to a more sustainable approach. Dr. Soraphol highlighted how consumer demand drives companies to adopt greener practices, especially among Generation Z. However, this has also led to concerns about greenwashing. “In addition to financial returns, Generation Z invests as a means of expression. They invest in companies that align with their ideologies, be it political or environmental,” he said. Today, Dr. Soraphol noted that there are around 86 funds worth 51 billion baht in Thailand, while before 2013, there were only two funds. He added that while sustainability is an important subject, only a few people in companies are interested in it, so it is important to talk to different companies and see what sustainability projects a company does and what seems to be working. Second, forming a community of people passionate about sustainability is important. To implement this, SET gives scholarships to students who want to learn more about net zero. Professor Ellie explored the vital role of academia in driving the transition towards net zero sustainability. Her discussion included promoting sustainable research, the significance of legal cases surrounding environmental issues, and the need to comprehend the complexities of human values. Professor Ellie called on academics to embrace their roles as a generation of conscientious reporters, aiming to combat greenwashing practices. Hon concluded that there is no one solution to net zero. While nuclear fusion technologies are being developed, everyone must buy time enough to get there while doing everything they can to reduce carbon emissions.  

Question and Answer with Sam Hon, Co-founder and CEO of CREX

What are the potential environmental benefits and risks associated with the net zero transition, and how can these be effectively managed?

• Reducing greenhouse gas emissions can reduce climate change impacts such as floods, extreme weather, forest fires, loss of natural habitats, poor air quality, and biodiversity loss.
• Reducing or avoiding climate change impact reduces business risks associated with logistics disruption, food security, loss of residential/commercial properties, power disruption

How important are Market Mechanisms such as carbon offsets and RECs in achieving net zero?

• Carbon offsets and RECs have demonstrated that businesses are willing to invest in projects that reduce or remove carbon elsewhere when given a financial instrument.
• Ideally, under voluntary disclosure and commitment, a business can invest in carbon offsets for the residual emissions when it has met its annual reduction target. The challenge is in finding credible projects to invest in.
• Unfortunately, many carbon offset projects have failed to meet credibility, transparency, and additional criteria, severely lowering the overall confidence in such mechanisms.
• Green hydrogen works best when there is an excess of renewable energy, favoring shelf life over charging efficiency. Technology will play an essential role in breaking through these challenges at all scales/levels of decarbonization.

How can companies make meaningful contributions towards net zero, and what are their key challenges in doing so? COMMIT to methodologies recommended by the Intergovernmental Panel on Climate Change (IPCC) & The Science Based Targets Initiative (SBTi). The supply chain will respond to a well-planned and incentivized transition SHARE sustainable practices and innovation collaboratively and transparently ADOPT standards, carbon accounting, and reduction solutions such as electrification, renewable energy, optimizing processes &supply chains, and implementing energy-efficient technologies. Challenges include requiring an organizational mindset shift, high upfront costs, lack of regularity clarity, and balancing sustainability goals with economic growth. Reducing carbon emissions isn’t the core operation of most businesses. The cost of carbon isn’t well established or standardized internationally or regionally. How can emerging technologies such as carbon capture and storage, green hydrogen, and electric vehicles accelerate the new zero transition, and what are the barriers to their widespread adoption? Electrification is key to net zero transition, shifting scope 1 emissions to scope 2, allowing massive adoption of renewable energy through the grid. Any emerging technology that enables or lowers the cost of electrification will be a catalyst. Adopting electric vehicles is one such solution, while green hydrogen and other battery technologies can help stabilize the grid and reduce the dependency on fossil fuels for supporting base load.