12 minute read
On Sustainability and Trade: A View From NatWest
As the leading bank for customers in the UK, NatWest has been partnering businesses to champion sustainability, trade and investments in Asia. The Orient speaks with Søren Nikolajsen, CEO APAC of NatWest to understand the bank’s role in the green transition, the important trends in Asian trade, and the bank’s long history with the British Chamber of Commerce Singapore.
By Dominic Gabriel-Dean
Q: One of NatWest’s focus areas in the Asian market is ESG and sustainability. Can you tell us why this is an important area of focus for NatWest?
Soren: ESG and sustainability is a focus for NatWest Group overall. Helping to address the climate challenge and supporting our customers in their transition to net zero is a strategic priority for the bank. We see it as a core part of our strategy that also drives business opportunities.
Across Asia, there are many large and sophisticated investors that are increasing their investment activities in assets that support sustainability, renewable energy, social challenges etc. At NatWest, we work closely with banks, pension funds and asset managers to understand how they approach climate and ESG investments and help guide them through the latest developments in what is a complex and ever-evolving market. The Financial Institutions ecosystem more broadly plays a vital role in the transition to a sustainable future – both from an environmental and societal aspect. We want to be part of shaping that transition.
Q: How can financial institutions better partner with businesses in tackling climate change?
Soren: Banks and businesses are key parties in finding solutions towards a world with lower carbon emissions. NatWest supports its corporate customers in their efforts to reduce their carbon footprint via offering relevant products and services as well as through engagement and educational tools. That includes working actively with many of our customers to support the completion of their individual Transition Plans. NatWest is offering a service platform called ‘Carbon Planner’, a free to-use digital platform designed to help SMEs in the UK to manage their future fuel and operational costs and reduce their carbon footprint.
Q: NatWest aims to be net-zero across all financed emissions, assets under management and the operational value chain by 2050. Can you share concrete measures that NatWest has taken to contribute to this goal?
Soren: The efforts to reduce our emissions spans a wide range of initiatives, including helping to end the most harmful activities for the climate. From supporting our UK mortgage customers to increase their residential energy efficiency, to how we make lending decisions for large corporates.
NatWest has developed a Climate Decisioning Framework tool to significantly enhance the way we engage with customers on climate issues and understand their transition journeys and climate related risk in a more structured way. This way we can better support our customers’ transition plans through the provision of funding, products, and ideas so they may develop and implement their transition plans. As more data is collected, these tools will support NatWest Group’s own Climate transition plan and be integral to our decision making.
Climate targets are also included as a factor in executive remuneration. And as part of supporting our customers’ transition to net-zero, we have set a target to provide £100 billion in climate and sustainable financing and funding between July 2021 and the end of 2025. As of 30 June 2024, NatWest has provided £78.3 billion of that.
And finally, we work actively with governments, industry organisations and regulatory bodies to help shape the discussion for a path towards netzero. NatWest is also a founding member of the Net Zero Banking Alliance and is a founding signatory member of the coalition of the Glasgow Financial Alliance for Net Zero (GFANZ).
Q: What are some key emerging ESG investment themes in the APAC market that investors are interested in?
Soren: We regularly conduct surveys on ESG investments amongst institutional investors in Asia Pacific to gauge developments and moving trends. Our latest survey showed that Adaptation and Transition have become key areas of focus. Asian investors would like to increase capital allocated to adaptation and transition (71% and 58% respectively). This is materially higher compared to a recent survey of European investors who were at 22% and 16% respectively.
Disclosure-related regulations is another key theme. 68% of Asian investors we surveyed think that transition plan disclosure requirements will have the biggest impact on their investment strategies.
Energy transition carbon credits is also thought to be playing a crucial role. 65% of Asian investors in our survey named Energy transition carbon credits as one of the most useful tools to finance the early retirement of coal-fired power plants, followed by government subsidies at 55%. The use of coal, of course, is a particular area of importance in Asia Pacific.
On balance, institutional investors in Asia are increasingly engaged and getting more sophisticated in how they approach ESG investments. It’s a trend we expect will continue.
Q: What are some key areas of consideration for companies looking to plan energy transition which are important to investors?
Soren: It’s a wide range of areas, but with some consistent themes. In our recent Asia investor survey, 71% considered that ‘objective and overarching strategy’ are the most important components of a transition plan. This was followed by ‘Green House Gas metrics and sectoral pathway’ at 54%, and ‘Business planning and operation’ at 33%.
Nippon Life, one of the largest investors in Japan, have disclosed their Nippon Transition Finance Framework detailing how they assess transition investments. The framework includes an evaluation of a company’s transition strategy and alignment between emissions reduction plans and elements of strategy in order to achieve it. Evaluation of investment plans, R&D and governance structures are other parts of Nippon Life’s overall assessment.
In general, ensuring there is consistency between a company’s transition plan and its strategy to support the overall objectives of the company is a key starting point. Businesses should calibrate their objectives in order to meet global climate goals, i.e., path towards meeting targets as set out in the Paris agreement. And finally, to incorporate the transition plan into business planning and the day-to-day operations of the company.
Q: According to NatWest, Asia is a more important trade and investment partner for the UK than is widely understood. Can you share broadly why this is the case? What are some trends in UK-Asia trade that businesses and investors need to pay closer attention to?
Soren: Asia is important as a trading partner not just because the current level of trade is substantial, it is also growing rapidly. The UK’s top ten Asian counterparties accounts for almost 16% of total UK trade (exports & imports). This is almost as much as the United States at around 16.5%.
And trade with Asia is growing fast, supported by developing economies increasing interest in what British companies have to offer. In the past two decades, growth in UK trade with Asia has outpaced that of other parts of the world.
Post-Brexit, the UK’s total trade growth with Asia’s top ten economies averaged 8.3% a year, only marginally lower than the trade growth with the US at 8.5% a year. In contrast, Europe’s trade with the UK has grown about 6% in the same period.
While Europe will continue to be an important and bigger trading partner for the UK for a long time, we have seen a shift in the UK’s trade focus towards other developing parts of the world post the 2016 Brexit referendum.
Add to that, a situation where the macroeconomic growth in Asia is looking very dynamic and strong. The International Monetary Fund (IMF) expects emerging Asia and India to be the fastest-growing regions in the world over the remainder of this decade. This supports the view that there are plenty of opportunities to grow British trade with the Asia Pacific region.
British companies will be able to capitalise on these opportunities. Some of the key sectors that are in high demand in Asia include most things digital, renewable energy, defence, aviation, education, and financial services.
There are many companies across the UK with products and services that are ready for export but may not be focusing on the export opportunities. They can make Asia Pacific even more important for the UK economy.
Q: What are some existing barriers to trade between the UK and Asia? Will that likely change in the next couple of years, and if so, how?
Soren: Where barriers exist, they are being addressed. The UK has done an excellent job post the Brexit referendum in 2016 to re-establish trade agreements with many countries across Asia Pacific. Free-trade agreements are in place with Australia, Japan, New Zealand, Singapore, South Korea and Vietnam.
In 2022, the UK also signed a Digital Economy Agreement with Singapore – a first of its kind for the UK. That was followed by a Green Economy Framework agreement also with Singapore, highlighting the importance of developing the Green Economy for both countries.
The UK is also soon joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). While that has much broader reach geographically, in Asia it will add Malaysia to the list of countries with a trade agreement for the UK.
With trade agreements and the all-important positive macroeconomic backdrop, the key parameters are in place to see continued growth for British companies’ trade with Asia Pacific. It makes sense to go where the opportunities are.
NatWest and the Chamber: A Shared Heritage and Commitment to Business and Trade
Q: Can you describe NatWest’s relationship with the Chamber?
Soren: Our relationship with the British Chamber of Commerce Singapore goes back a long time. I would like to think it is a mutually beneficial relationship where we draw on our respective areas of expertise and often collaborate on various initiatives. Aside from the business element, the Chamber is also an important way for us to engage with the British business community in Singapore. Something the team at the chamber does exceptionally well through their many business-focused and social events.
During the COVID-19 pandemic the Chamber played a particularly important role as a voice to the Singapore government on behalf of British businesses. That had tangible impact that individual businesses could not have achieved on their own.
With its strong understanding of the IndoPacific region, we also rely on the Chamber as a source of information and its ability to connect with British Chambers in the rest of Asia.
The Chamber also acts as a good conduit to engage with the Singapore Government on various topics. It is made even more valuable through the strong collaboration between the Chamber and the team at the British High Commission in Singapore.
Q: What are some key highlights of NatWest’s involvement with the Chamber?
Soren: The bank’s involvement with the Chamber spans across multiple areas, all of which are relevant, so there are many highlights.
We have a number of colleagues engaged with the Chamber’s sub-committees such as the Women in Business Committee and the Financial and Fintech Committee.
The ability to engage actively with the British business community in Singapore, many of whom are customers of the bank, is another important aspect and key highlight of our involvement.
We have also co-hosted a number of events with the Chamber that matches objectives for the bank and the Chamber.
As an example, we hosted a very successful sustainability seminar to a full house, with participation from members of the chamber and the banks customers. Recently in the run up to the UK general election, we hosted a well-received UK economic and election forecast event. These joint events align with the objectives of bringing value to the Chamber’s members and to NatWest’s customers.
A recent highlight was our engagement with the Chamber in celebrating its 70th anniversary. The platinum year is a milestone and testament to the consistent and growing value the Chamber delivers to its members. NatWest was proud to support the event held at the High Commissioner’s residence, Eden Hall.
The Chamber creates a sense of community amongst its members in Singapore that is very collaborative. NatWest and the other members benefit from that.
Q: Can you highlight a memorable moment NatWest shared with the Chamber?
Soren: That will have to be winning the ‘Sustainability Champion of the Year’ Award at the Chamber’s 23rd Annual Business Awards. The award recognised the commitment of NatWest as a leader in sustainable finance and overall commitment to the transition to a world of lower emissions. It was a welcome recognition of the teams that support the green agenda every day.
NatWest Group serves customers in the UK supporting them with their personal, private, and business banking needs. NatWest aims to help customers at all stages in their lives, from opening student accounts, to buying their first home, setting up a business, and saving for retirement. Alongside a wide range of banking services, NatWest offers businesses specialist sector knowledge in areas such as manufacturing and technology, as well as access to specialist entrepreneurial support.
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