Introduction

On 31 August 2022, the Centre for Commercial Law in Asia (“CCLA”) at the Singapore Management University (“SMU”) Yong Pung How School of Law hosted a conference titled “Sustainable Banking and Financial Regulation in Asia: Principles, Practice and Innovation”. The conference was co-organised with the Herbert Smith Freehills China International Business & Economic Law (CIBEL) Centre of UNSW Sydney, and supported by the Chinese Journal of Comparative Law.

The conference sought to promote discussion on topics including the treatment, adoption and regulation of digital currencies and assets, as well as sustainability practices and collaboration on digital finance. The conference also witnessed the launch of CCLA’s Sustainable Development and Commerce Initiative in the presence of the Guest of Honour, Justice Ang Cheng Hock.

Industry Panel: Sustainable Banking and Financial Regulation in Asia

The first panel of the conference was an Industry Panel on “Sustainable Banking and Financial Regulation in Asia”.

The treatment and adoption of digital assets and currencies

Mr Howard Silby (Chief Innovation Officer, National Australia Bank) kicked off the panel with a presentation on the potential of digital assets and currencies. Blockchain could contribute to ESG reporting as a means of earmarking and auditing green assets. However, while elements of the future of finance are likely to be blockchain-enabled, there were also regulatory challenges considering the complex nature and decentralisation of digital assets, such as the need for licensing regimes for cryptoassets beyond the simple anti-laundering process, and the difficulty in classifying cryptoassets, whether as a means of payment or security.

Assessing the risks of digital assets

Mr Tan Boon Gin (Chief Executive Officer, Singapore Exchange Regulation) next spoke about the regulation of cryptoassets, and elaborated on how the different structures and features of different cryptoassets affected the risks that they presented. In this regard, the Basel Committee on Banking Supervision’s (BCBS) consultation on the proposed prudential treatment of cryptoasset exposures based on their characteristics, was useful as a reference point.

Greenwashing and inaccurate sustainability reporting

Ms Natalie Curtis (Partner, Herbert Smith Freehills) followed by sharing her views on greenwashing and ESG-related litigation. Greenwashing, such as the making of inaccurate ESG or sustainability-related statements and disclosures, attracts various risks, e.g. in the form of claims for misleading or deceptive conduct. She observed that we are yet to see any greenwashing-related litigation in Singapore and other areas of emerging ESG-related litigation risk included traditional areas of law (tort, statute, consumer and administrative law etc), as well as workplace and human rights issues.

Digitalisation and sustainability not mutually exclusive

Mr Lam Chee Kin (Managing Director & Head, Group Legal, Compliance & Secretariat, DBS Bank) delivered the final presentation in which he suggested that digitalisation and sustainability should not be seen as distinguishable concepts but as consistent with each other as we looked to the future. He stressed the importance of the academic community in driving consensus and rallying support for sustainability advocacy. He also urged the academic community to bridge existing legal gaps with comparative studies and harmonisation work.

Need for harmonisation of ESG reporting standards

The Industry Panel concluded with a question-and-answer session. The moderator, Ms Ipshita Chaturvedi (Partner, Dentons Rodyk), raised the issue of there being different ESG reporting standards. Some panellists acknowledged that fragmentation would lead to difficulties in combating greenwashing and in allowing investors to make informed decisions. Competing taxonomies and standards could lead to inefficiencies and operationalisation costs. Nevertheless, there were data tools, such as ESGenome spearheaded by SGX RegCo, which would allow companies to map their information to competing standards.

Academic Panel 1: Sustainability and Regulation in the Banking and Financial Sectors

After the lunch break, the conference continued with the first Academic Panel titled “Sustainability and Regulation in the Banking and Financial Sectors”.

More Than Money: Innovation in Financial Services Governance

The presentation by Mr Robert Chalmers (Flinders University) discussed trends in financial services governance. He observed that there had been both a “business model shift”, where players in financial sectors are moving into other sectors and vice versa, and a “governance shift”, in that most products and services will increasingly cut across many regulatory dimensions. Where the legal framework of financial services governance is concerned, the laws on intellectual property and data trusts are relevant. Furthermore, in general, data governance is moving from ex post to ex ante regulation. Mr Chalmers stressed the importance of culture and systems thinking in paving the way forward. He suggested that there could be different levels of harmonisation, modularised credential approaches, and recognition of the sociological context of technology.

Sustainable Banking and the Prospects of Competitor Collaboration

Prof Deborah Healey (UNSW Sydney) continued the discussion with a presentation on the issues surrounding opportunities for collaboration on sustainability between competitors in the banking industry. In practical terms, a particular legal system may restrict the consideration given to sustainability unless there are exempting mechanisms which create safe harbours for conduct which might otherwise be in breach of competition law. In many cases, sustainability could be analysed as part of the “overall benefit” in a collaboration agreement. For example, competition laws in the EU, Singapore, and Australia might permit collaborations addressing sustainability in certain circumstances. However, boundaries would have to be drawn to ensure that behaviour that is truly anti-competitive does not slip through. Sustainability needs to be approached in terms that are less rather than more anti-competitive and must be able to be weighed up against public benefits.

The Use of Capital Requirements in the Transition to a Greener Economy

Next, Asst Prof Nydia Remolina León (SMU) presented a paper in which she opined that, in recent times, some prudential authorities have begun or announced an intention to examine aspects of the relationship between climate risks and the regulatory capital framework. Currently, perspectives regarding the feasibility, appropriateness and desirability of using the regulatory capital framework to address climate-related risks vary significantly across jurisdictions. On the global level, having shared views and approaches of setting international standards on the use of capital frameworks to address climate-related risks may not be achieved in the near term. Asst Prof Remolina León suggested enhancing the role of the BCBS which would lead to international cooperation on this development, implementing regulatory sandboxes for environmental-related risk analysis at a national and cross-border level, and developing open finance and open data initiatives for climate change.

Smart Contract, Central Bank Digital Currencies, and Programmable Money: Practices and Innovation in China

Rounding off the presentations, Assoc Prof Xichen Li (Xihua University) and Dr George Tian (University of Technology Sydney) provided an overview of the application of the e-CNY in China. A key feature of e-CNY is its design to enrich the forms of legal tender. Unlike Bitcoin-style cryptocurrency, the e-CNY is not a decentralised currency and does not operate on the blockchain. Nevertheless, as a digital currency, it can work with a blockchain smart contract. In China, the e-CNY had shown itself to be useful, scalable and programmable, although there were also legal issues in the form of possible gaps and conflicts with existing laws, as well as issues with cross-border law enforcement. The presenters suggested that certain domestic laws be revised to legally recognise the e-CNY, and that there be revision of interim regulation on cash management to encourage institutions and individuals to make settlements on e-CNY.

Academic Panel 2: Green Innovation and Harmonisation in the (Crypto)finance World

Next up was the second Academic Panel on “Green Innovation and Harmonisation in the (Crypto)finance World” which saw the following presentations.

A Roadmap to Green Financing and Sustainable Development: Transplanting Principles from Denmark to a Singaporean Context

The panel kicked off with Mr Ian Kwek (Legal Clinic) and Dr I-Ju Chen (University of Birmingham) presenting their paper on transplanting principles from Denmark to Singapore regarding green financing and sustainable development. Denmark’s hybrid model of top-down and bottom-up approaches accommodates flexibilities while holding stakeholders accountable. Moreover, constant dialogue is fuelled by stakeholder participation which in turn enables the government to introduce policies and regulations which suit the changing dynamics of sustainable development. The presenters proposed data decentralism in relation to sustainability and green finance, with upsides including the sharing of transparent and traceable information and peer-to-peer logic which enables positive environmental impact to be demonstrated by real-time collection and analysis, allowing for timely decision making.

The ASEAN Taxonomy for Sustainable Finance: Assessing Regional Cooperation in Light of National and Global Developments

Next, Asst Prof Stefanie Schacherer (SMU) gave a comprehensive overview of taxonomies, and in particular the ASEAN Taxonomy for Sustainable Finance. The ASEAN-developed taxonomy aims to avoid conflicting approaches to measuring ESG information as well as to promote sustainable assets within the region, but is a non-binding instrument which serves as a guideline for member states. For recognition under the taxonomy, one environmental objective (climate change mitigation, climate change adaption, protection of healthy ecosystems, and/or resource reliance and circular economy) as well as one essential criterion (do no significant harm and/or remedial measures to transitions) must be met. Overall, the ASEAN taxonomy is the starting point of minimal harmonisation among member states. It also seeks to provide no common definition to sustainable economic activity, giving leeway to ASEAN member states.

The Law and Regulation of Cryptoassets in Singapore

Assoc Prof Christian Hofmann and Ms Lisa-Marie Ross (NUS) continued the presentations with a discussion of the existing regulatory laws relating to cryptoassets in Singapore. While the crypto-regulation framework in Singapore had been strengthened by the Payment Services (Amendment) Act 2021 and the Financial Services and Markets Act 2022, it was noted that utility tokens and NFTs were unregulated. There was a need for enhanced and more specific regulation of cryptoassets. Currently, the decentralised nature of cryptoasset creation and transfers leads to difficulties in holding one entity responsible for breaches of requirements. A possible solution would be to draw up similar principles as in financial services regulation and apply them in cryptoasset schemes.

Stablecoins, Regulation and the Evolution of Money

Lastly, Academic Panel 2 concluded with a presentation by Mr Tony Song (UNSW Sydney) and Assoc Prof Jason Grant Allen (SMU) on whether stablecoins should be considered as money for the purposes of regulation. The presenters highlighted the need for a characteristic-driven taxonomy which can accommodate the novelty, hybridity and dynamism of stablecoins over time. It might be preferable to consider the token, peg and backing of a stablecoin as distinct concepts that could be individually characterised as the medium of exchange, unit of account, and store of value, respectively. This would clear up any confusion with grappling with the definition of stablecoins. A deeper understanding of stablecoins is also necessitated by the recent integration of stablecoins into real world loans and the use of stablecoins as security, as well as the need to formulate policies around their use.

Closing remarks

Drawing the conference to an end, Prof Liu Qiao (Joint Editor-in-Chief, Chinese Journal of Comparative Law), Prof Heng Wang (Co-Director, CIBEL, UNSW Sydney) and Assistant Professor Lau Kwan Ho (CCLA Deputy Director, SMU) delivered their closing remarks and expressed their gratitude to all panellists and participants for gracing the event with their presence. Selected papers from the conference will be published in an upcoming special issue of the Chinese Journal of Comparative Law.

* The writer would like to thank the SMU Centre for Commercial Law in Asia for the opportunity to attend and cover the event.

** This blog entry may be cited as Sheena Heng Xuan Hui, “Conference on Sustainable Banking and Financial Regulation in Asia: Principles, Practice and Innovation” (Date) (http://www.singaporelawblog.sg/blog/article/283)