Bankers can do their part for the earth

Financiers have a role to play in move towards a circular economy, says expert

SINGAPORE — In an out-of-the-box move towards cutting the use of energy and raw materials last year, consumer, health and lighting products company Philips began offering “lighting as a service” to Schiphol airport in the Netherlands.

The airport would pay for the light it used, and Philips would remain the owner of the fixtures and installations, which were designed to last longer and with components that can be individually replaced.

The Philips case reflects a move towards a circular economy, and bankers and financiers have a role to play in such efforts, said banker Herry Cho at the Responsible Business Forum yesterday.

In a circular economy, resources are redesigned, recycled and reused as they are returned to the industrial supply chain.

New business models entail changes in cash-flow models and risk allocations, said Ms Cho, ING’s director of capital structuring and advisory in Asia, and its Asia sustainability lead.

“For example, if you just sell lighting, the ownership of this product transfers from producer, from inventory, to the buyer,” she said during a discussion on responsible consumption and production.

“But if the producer continues to own and provide it as a service, suddenly you have a growing balance sheet on this side, you have increasing need for working capital and you have contracts that have to be relied upon, from the financier’s viewpoint. These are all real issues, and solutions need to be found in order to facilitate funding of circular economy,” Ms Cho added.

For small farmers who require financing, financiers can also help by linking them with large companies. The farmers may then secure contracts to supply to the large companies, and financing can be offered to the farmers at reasonable rates.

Food wastage and the culture of consumption were other topics raised at the discussion, facilitated by United National Environment Programme’s, programme management officer (agriculture, food systems) James Lomax.

Other panellists included representatives from Marina Bay Sands (MBS), food services giant Sodexo, and the Cambodian government.

The amount of food the world needs to produce in the next 40 years is equivalent to what it has produced in the previous 8,000 years, said Mr Roshith Rajan, Sodexo’s Asia-Pacific corporate responsibility lead.

Calling food waste a growing inefficiency, he said it is generally a problem at the post-harvest level for developing countries, and at the consumer level for developed countries.

MBS sustainability head Kevin Teng said the integrated resort manages food waste through five anaerobic digesters, and is also piloting a composter. Consumers and banquet attendees can help venues to do better planning and manage waste by RSVP-ing to event organisers, he said.

Asked about reconciling the need for economic growth with a circular economy, the panellists said there has to be sufficient demand from the public for change to take place.

As an example of how things are changing, Ms Cho cited how Shanghai’s municipal government took out gross domestic product growth as a key performance indicator from last year.

Instead of focusing on just growth numbers, Shanghai officials have been told to focus on “quality” and “efficiency” and the city’s contribution to the country, according to media reports.




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