The Taiwan Banker

Suppose you are a family-owned OEM which has been in business for decades. You clearly have a deep understanding of your product and your users. Now, with the introduction of net zero objectives around the world, you will need to rethink your designs, processes, and even your entire value proposition in relatively short order – ideally long before the target dates of 2050 or 2060. SMEs make up 99% of companies in Taiwan. Will they collectively prove capable of industrial-scale change? This task will fall to banks, the only sector capable of effectively coordinating such a disparate group of stakeholders. Doing so will require a perspective strongly rooted in practical experience, moving away from a simple capital funding model into development of mentorship relationships and global systems thinking. Nicola Wakefield Evans, AM non-executive director of Australia’s Clean Energy Finance Corporation (CEFC), spoke about this transition during a recent conversation with the Taiwan Banker. CEFC was founded in 2012 with AU$ 10 billion in government funds. Over time, however, banks have developed their own in-house expertise, she says, relying less on government financing and more on sustainability-linked markets and civil society. The eventual goal will be the creation of an entire sustainable ecosystem, integrated through shared, consistent, and transparent disclosure standards. Sustainability emerges as its own discipline The talent bottleneck from which the sustainability field is now just starting to emerge started in the academy. Environmental sustainability has been recognized as a worthwhile object of study for decades, along with business. Financial sustainability is however a newer concept: “how we can drive the funding so that you can make a change, but we're not going to destroy your business in the sort of requirements that we impose on you.” In part, the answer will be multidisciplinary, asserts Wakefield Evans. Faculties in engineering, mathematics, and economics are examining how to incorporate sustainability into their curricula. It is also becoming increasingly possible to get dedicated degrees in sustainability. Regardless of the long-term talent pipeline, however, the reality is that the field is evolving too quickly to rely on generational replacement; mid-career up-skilling will be essential. Wakefield Evans pointed to herself as an example, with a background in law rather than environmental science. Retraining is occurring through a variety of venues, whether it is through industry associations such as property, banking, mining, or energy, or perhaps directly through large companies or other institutions. It is also worth noting that the entire field is disproportionately female. “Most of the chairs of sustainability committees of Australian listed companies are women,” noted Wakefield Evans. “I think women have gravitated to this area because we think about the long-term impact of what we’re doing to the planet because of our children and our grandchildren and the people around us.” “I think it’s one of those industries that women have gravitated to because it’s interesting, it’s new, it's innovative, you can really adapt to the environment, and use your skills to make real change. That's what drives a lot of women.” An explosion of shareholders The reason the sustainability mindset and skillset is so unique is that lessons and experiences need to be rapidly assimilated from around the world. “A lot of countries are setting the target but have no idea what the journey is going to be,” said Wakefield Evans. “What I've always really admired about Taiwan is you can see a problem and you find a solution. Taiwan has always been one of those countries where it will take the best of what it sees from other jurisdictions. That adaptability is really important because it means that you'll come to the solution probably a lot faster.” There is certainly no shortage of stakeholders who can offer lessons. In addition to general environmental regulators and industry-specific stakeholders, companies with direct market financing may need to satisfy securities regulators, financial services regulators, and stock exchange regulations in multiple jurisdictions. A supplier may also need to apply all these considerations to their customers, which includes credit customers for banks. “On one of my boards, we’ve got a mud map,” says Wakefield Evans. “And I would say that it triples year on year about the people we've got to take into account just for our global business.” The COP regime previously encouraged every country to come up with their own standards in a bottom-up way, which is just now starting to be rectified through international taxonomies. Banks must incorporate flexibility If experts in the field are having trouble keeping track of the pace of change, then, smaller businesses will have no hope. Their daily survival is already a challenge, and they already have special financial needs even before sustainability is factored in. Based on Australia’s experience, said Wakefield Evans, the path forward in bank-SME relationships will involve moving away from standard off-the-shelf contractual arrangements into more innovative and bespoke financing models. Sometimes the sustainability requirements may be attached to the company, and other times to individual projects. “The way that we fund this company is going to be different to the way we fund that company.” Moreover, certain particularly hard-to-abate industries will have their own requirements and require special attention – she gave the example of property development. This type of iterative service-based improvement is not the sort of innovation which usually results in a tangible work product. The challenge is not just about finding capital for a certain type of equipment or infrastructure. Instead, it is about new types of relationships between banks, credit customers, investors, regulators, non-governmental and inter-governmental organizations, and other emerging members of the growing zoo of international stakeholders. No wonder talent has proven to be such a limiting factor.