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Recognising the growing interest among finance practitioners and policymakers on Sustainable Finance, the Sim Kee Boon Institute for Financial Economics (SKBI) at Singapore Management University, in partnership with the TBLI Group of the Netherlands, organised the 9th Annual SKBI conference on "Sustainable Finance" on 7-8 November 2019.

The 1.5-day event brought together 200 local and overseas participants from the finance and banking industry, government agencies, businesses and academia to discuss and share the latest developments and insights in the area of sustainable finance.

In their welcome speeches, Dean of SMU Lee Kong Chian School of Business Professor Gerard George, Director of SKBI Professor David Fernandez, and Mr Robert Rubinstein, Chairman of TBLI Group, shared about the objectives and programme of the conference.

Professor Brad M. Barber

Professor Brad M. Barber, Gallagher Professor of Finance, Graduate School of Management, University of California at Davis, USA, kicked off the proceedings on the first day with his keynote speech on ‘What academic research shows about sustainable finance’. He shared the findings of a research in which his co-authors and he sought to understand whether investors are willing to accept lower financial returns for nonpecuniary benefits of intentional impact investing.

They documented that financial returns earned by impact funds are 4.7% lower than those earned by traditional venture capital funds. To examine whether investors in impact funds willingly trade off expected financial returns at the time of investment decisions, they used a pricing framework of willingness to pay (WTP) for impact, and found that investors accept 2.5-3.7% lower IRRs for impact funds. The research found that development organisations, banks, insurance companies, and public pensions exhibit reliably positive willingness to pay for impact.

As for what attributes of investors affect investors’ willingness to pay for impact, the research found that investors with organisational missions have high WTP. In addition, investors facing political and/or regulatory pressure and those benefiting from political or local goodwill exhibit a higher willingness to pay for impact. In contrast, those subject to legal restrictions (e.g., Employee Retirement Income Security Act) exhibit low WTP for impact.

Dr Priscilla Lu

In the second keynote address, Dr Priscilla Lu, Head of Sustainable Investments, Alternatives For DWS Asia, DWS, Hong Kong, who is also an SKBI Advisory Board Member, spoke on “Smart Cities and Sustainable Finance”.

Dr Lu shared that news report have shown that China’s urbanisation rate was at 58.5% as of 2017 and is expected to reach 70% by 2035. According to the United Nations, global urbanisation rate was at 55% in 2015 and is expected to reach 68% by 2050. Such rapid urbanisation is creating a lot of stress on cities to be able to manage the increasing scale of challenges such as traffic congestion, security and garbage collection. To respond to these challenges and provide the services required by urban dwellers, cities will have to leverage smart technologies.

A study has forecasted the smart cities market size to grow from US$308.0 billion in 2018 to US$717.2 billion by 2023, at a Compound Annual Growth Rate of 18.4%. Another study indicated that global Smart City revenue will reach US$88.7 billion by 2025. A report also informed that worldwide spending on the technologies that enable Smart Cities is forecast to reach US$80 billion in 2018. Over five years, that total will reach US$135 billion by 2021.

Factors such as a need for public safety and communication infrastructure, citizen empowerment and engagement, and increased adoption rate of advanced technologies, are driving the smart cities market. Increased environmental concerns, growing demand for advanced technologies such as loT and 5G, and developing economies are generating a number of opportunities for smart cities market.

Mr Mikkel Larsen

The keynote speaker for Day 2 of the conference was Mr Mikkel Larsen, Chief Sustainability Officer of DBS who spoke on “Financing Solutions to Societal Problems at Scale – A Case for Impact Measurement”. He opined that the key to impact investing and impact measurement is data, in particular, social and environmental data, so that capital is not misallocated based on wrong or incomplete understanding of a project’s impact.

Such data must be captured in an affordable way, are free, credible, meaningful, complete and comparable. The resultant digital finance will help promote financial inclusion so that 1.7 billion people (more than 25 percent) in the world who currently do not have access to basic banking products will be served. It will also help encourage sustainable finance where capital is channelled to where it can do the most good and least harm. Digital finance can also help to drive sustainable practices by using technology to create awareness and drive consumer behaviour through digital means.

In addition to the keynote speeches, there were two roundtable discussions on ‘Engaging Family Offices on Impact Investing’ and ‘Climate Strategy at Scale’, as well as numerous workshops on a range of topics, including ‘Gender-Smart Impact Investing’, ‘Green Infrastructure’, Impact Investing in Greater China’, and ‘Impact Measurement’.

SINGAPORE, 21 October 2019 (Monday) - One-year-Ahead headline inflation expectations polled at 3.2% in September 2019. The reading compares to 2.9% polled in June 2019, and the previous five-year third quarter (2014-18) average of 3%.

The overall CPIEx Inflation Expectations, after adjusting for potential behavioral biases and re-combining across components, was at 3.3% in September 2019 compared to 2.9% in June 2019. The aggregate inflation expectations after correcting for behavioral biases increased to 3% in September 2019, compared to 2% in June 2019.

Excluding accommodation and private road transportation related costs, the One-year-Ahead Core CPIEx inflation expectations increased to 3.3% in September 2019 compared to 3.1% polled in June 2019. For a subgroup of the population who own their accommodation and use public transport, the One-year-Ahead CPIEx core inflation expectations inched up to 3.2% in September 2019 from 3.1% in June 2019. This subgroup’s expectations of core inflation closely resembles the Singapore Core Inflation Expectations, as unlike the general population they are not exposed to private road transportation or accommodation expenses.

The one-year-ahead composite index SInDEx1, that puts less weight on more volatile components like accommodation, private transport, food and energy, polled at 3.2% in September 2019 compared to 3.0% in June 2019.

DBS Chief Economist and Managing Director of Group Research, Dr. Taimur Baig commented, “Inflation remains low worldwide, with Singapore at the center of that narrative. While such trend is likely to persist, signs of a short-term bottom in inflation, both actual and expected, have emerged. Food and energy prices are low, but not falling any further. The survey readings are consistent with around 3% inflation expectations in Singapore over the medium term. ”

SMU Assistant Professor of Finance and Principal Investigator of the DBS-SKBI SInDEx Project, Aurobindo Ghosh observed, “Economic and policy uncertainty remain elevated worldwide, while growth expectations have dimmed. Accordingly, MAS has followed suit with major global economies to ease monetary policy in their October policy decision.

”Against this background, the uptick in inflation expectations is a tad surprising. Academic literature has highlighted a natural tendency of survey based inflation expectations measures to often be biased upwards despite adjustments. This has been widely observed in survey based methods in the University of Michigan Surveys of Consumers in the US, and more recently in New Zealand and Italy. It is therefore premature to read anything major from the latest findings ” Prof. Ghosh added.

The DBS-SKBI SInDEx survey was augmented in June 2018, based on a joint research study conducted by SMU researchers in collaboration with MAS and the Behavioral Insights Team, where respondents were polled about their perceptions of components of the Consumers Price Index (CPI) and adjusted for possible behavioral biases prevalent in online surveys.

Based on the recommendations of that study, the research team had, since March 2019 polled the One-year-Ahead inflation expectations of all of the major components of CPI-All Items inflation. Compared to June 2019, the September 2019 survey revealed inflation expectations across all categories have either stayed the same or inched up quarter on quarter, although without the same quarterly benchmark we were not able to conclude if the uptick is a peculiarity or a natural quarterly seasonality of these indices. The component inflation expectations indices that increased in September 2019 survey compared to June 2019 are transport, healthcare, education, recreation and communications.

For the longer horizon, the Five-year-Ahead CPIEx inflation expectations in the September 2019 survey elevated to 4.1% from 3.9% in June 2019. The current polled number is lower than the long-term (from 2012-19) average of 4.2%.

The Five-year-Ahead CPIEx core inflation expectations (excluding accommodation and private road transportation related costs) stayed unchanged at 3.9% in September 2019 from 3.8% in June 2019. Overall, the composite Five-year-Ahead SInDEx5 inched up to 4% in September 2019 from 3.8% in June 2019, slightly lower compared to its historical average of 4.0%.

Methodology

DBS-SKBI SInDEx survey yields CPIEx Inflation Expectations (estimating headline inflation expectations) and related indices are products of the online survey of around 500 randomly selected individuals representing a cross section of Singaporean households. The survey is led by Principal Investigator Dr. Aurobindo Ghosh, Assistant Professor of Finance (Education) at Lee Kong Chian School of Business, SMU. The online survey helps researchers understand the behavior and sentiments of decision makers in Singaporean households. DBS Group Research is a co-sponsor and research partner together with the Sim Kee Boon Institute for Financial Economics (SKBI) at SMU.

The quarterly DBS-SKBI SInDEx survey has also yielded two composite indices, SInDEx1 and SInDEx5. SInDEx1 and SInDEx5 measure the 1-year inflation expectations and the 5-year inflation expectations, respectively. The sampling was done using a quota sample over gender, age and residency status to ensure representativeness of the sample. Employees in some sectors like journalism and marketing were excluded as that might have an effect on their responses to questions on consumption behavior and expectations.