Advance Blog

April 18, 2023
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The BCG Agenda: Sustainable or Green Sheen?

There has been criticism of Thailand’s recent proposal to promote the country’s Bio-Circular-Green (BCG) economic model, with some arguing that it primarily benefits domestic conglomerates rather than driving economic development for the benefit of all citizens. There are also concerns that the exclusion of environmental advocates and conservationists from BCG committees suggests that the government and big businesses may be using the initiative for their “greenwashing” process to appear environmentally conscious.

The BCG model aims to utilize Thailand’s biodiversity and cultural richness for economic gain by leveraging cutting-edge technology and innovation. However, some have expressed concerns that the current BCG framework may lead to the exploitation of natural biodiversity by the government and private sectors for their own interests, potentially resulting in conflicts with local communities, conservation groups, and farmers.

Despite the criticisms, there have also been statements of support. Trade-related ministers within APEC recognized and commended ongoing efforts to promote the BCG Economy as a viable means of achieving inclusive, balanced, and sustainable recovery from COVID-19. The BCG model has also been viewed as a long-term solution to achieve economic growth, as well as environmental and climate objectives. Forestry ministers have encouraged the application of a more synergized approach to biodiversity, such as the application of the BCG Economy, in the forest sector. Not to be outdone, during last year’s APEC meeting in Thailand, the organizers highlighted the BCG economy through Women’s Empowerment, despite there being no oobvious links between the two themes.

The debate over the BCG raises questions about whether it is a worthy initiative or just a politically-motivated ‘green sheen.’ The success of any BCG as well as any ESG initiative depends on how well it can be measured and whether it truly benefits all stakeholders, rather than just a select few.

Bio-Diversity has gone mainstream.

One aspect of the BCG directly impacting ESG investing is its focus on bio-diversity. In just two months, a new category of ESG funds targeting biodiversity protection has experienced a significant surge in assets, growing by 15%. This is not surprising given the increasing emphasis on biodiversity as a crucial ESG objective post-COP15. Despite the absence of standardized data, the industry is rapidly expanding its bio-diversity market offerings, with the number of funds offering biodiversity strategies growing by 150% over the past year, although their combined assets remain relatively small compared to the broader ESG market.

The majority of these ESG funds are actively managed and based in Europe, where biodiversity regulations are most advanced. Axa Investment Managers and Lombard Odier Investment Managers were among the first players to enter this market, and they continue to be leading players.

The COP15 agreement has compelled the finance industry to focus on biodiversity, with the Global Biodiversity Framework calling for banks, insurers, and asset managers to mobilize at least $200 billion annually to protect the natural world.

However, like many areas of ESG, the lack of reliable biodiversity data poses a significant obstacle. “Black box calculations” could mislead firms, contrasting with established methodologies for measuring carbon emissions. The Partnership for Biodiversity Accounting Financials (PBAF) has identified significant disparities among providers’ approaches to biodiversity data, highlighting the need for standardization.

Firms must grasp the intricacies before making ESG claims, given the regulatory risk of being accused of “greenwashing.” While biodiversity is an essential element to consider while investing or promoting an ESG-focused fund, it must be supported by reliable, definitive, and credible data to make it an effective tool for achieving ESG objectives.

From global corporations to small businesses, organizations worldwide are dedicated to integrating sustainable and socially responsible practices into their operations. At Silk Legal, we understand the challenges of navigating the complex ESG landscape and maximizing opportunities for impact. Our experienced team can provide tailored solutions to help your business achieve its ESG goals and stand out as a leader in your industry. Contact us today at [email protected].

Dr. Paul Crosio
Partner at Silk Legal Ltd

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