Introduction

The 2024 Dentons Rodyk Dialogue marks the eighth consecutive year of collaboration between Dentons Rodyk and the Singapore Management University (SMU) Yong Pung How School of Law's Centre for Commercial Law in Asia. This year's Dialogue focused on the existential threat of climate change, with the central theme of "Climate Engagement, Finance, and the Law".

Kicking off the Dialogue, Professor Timothy Clark (Provost, Singapore Management University) introduced this year’s distinguished speakers and panellists: Mr Dave Sivaprasad (Managing Director, Partner and Southeast Asia Lead for Climate and Sustainability Practice, Boston Consulting Group), Professor Harro van Asselt (Hatton Professor of Climate Law, University of Cambridge), Ms Sim Ting (Managing Director, Head of the Corporate Services Group and General Counsel, GenZero), Ms Emily Low (Senior Partner, Deputy Head of the Corporate Practice Group, Dentons Rodyk) and Mr Jonathan Guwe (Partner, Co-Head of the Energy Practice Group and Vietnam Desk, Dentons Rodyk).

In his opening address, Mr Gerald Singham (Managing Partner, Global Vice-Chair, ASEAN CEO, Dentons Rodyk) expressed that climate change presents a fundamental threat to the environment. He framed the Dialogue around the roles that the public sector, the law and corporations could play to drive the green transition and redirecting financial flows into clean energy, setting the stage for subsequent presentations from Mr Sivaprasad, Professor van Asselt and Ms Sim Ting.

Energy transition in Southeast Asia

In his presentation titled “Energy Transition in Southeast Asia”, Mr Sivaprasad underscored the urgent need to accelerate global efforts to transition to clean energy. He highlighted that Asia, in particular, is central to a successful global climate transition due to its significant environmental impact. Not only is Asia crucial in reducing global emissions, it also stands to benefit greatly from a green transition as the region is highly vulnerable to climate risks.

Focusing on Southeast Asia, Mr Sivaprasad acknowledged the encouraging progress made in recent years, with countries in this region making significant commitments to decarbonisation. However, he stressed that more needs to be done to ensure Southeast Asia’s preparedness for the green transition. To this end, he proposed four key actions for the region: (1) developing green industries, (2) improving interoperability within Southeast Asia, such as facilitating exchange of green electricity products, (3) adopting globally credible standards, and (4) developing talent and expertise to support the climate transition.

Mr. Sivaprasad also emphasised the importance of ensuring that the climate transition is just and equitable. Identifying four key groups that will be most impacted by the transition – workers, communities, consumers, and small and medium-sized enterprises (SMEs), he stressed that the costs and benefits of the climate transition must be equitably distributed across these groups. For this to happen, he called for collective action from the public sector, corporates, investors, and civil society.

Financing fossil fuels

In his engaging presentation titled “(No) End in Sight? The Role of Law in Tackling Public Finance for Fossil Fuels”, Professor Harro van Asselt started by emphasising the incompatibility of fossil fuel production and climate goals. He underscored both the environmental imperative of avoiding carbon lock-in and the economic imperative of preventing stranded fossil fuel assets.

Despite the growing acknowledgment for the need to reduce reliance on fossil fuels, as seen from commitments to cut fossil fuel subsidies, Professor van Asselt noted that these commitments usually had no timeline and included undefined qualifiers. Additionally, financing for fossil fuels in 2023 was still three times as high as financing for renewable energy. Multilateral development banks are also still financing fossil fuels despite their commitment to align to Paris Agreement.

He highlighted the roles and limitations of international law, climate change litigation, and national legislation in shifting public financial flows away from fossil fuels. For example, Article 2.1(c) of the Paris Agreement requires signatories to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. Trade laws further regulate all subsidies for interfering with the free market, and yet fossil fuel subsidies have not been challenged.

As for the courts, Professor van Asselt shared that there has been an increase in cases targeting the financing of fossil fuels by public and private actors, even though several of these cases were quickly dismissed. In the international arena, the upcoming International Court of Justice Advisory Opinion may also help to crystallise international law obligations on public fossil fuel finance.

In conclusion, Professor van Asselt echoed Mr Sivaprasad on the need to take into account the equity dimensions of this issue and the safeguards needed to aid the transition of financing renewable energy in a fair and just manner.

Unlocking climate finance: The corporate dilemma of investing into decarbonisation

Our industry speaker, Ms Sim Ting kicked off her presentation by sharing a personal anecdote of a recent experience in Chiang Mai, where her team had anticipated a drizzle during the tail end of the monsoon period, only to be caught in the worst monsoon weather experienced in Chiang Mai in the last 30 years. This anecdote put into perspective the importance of climate change - in Ms Sim’s own words, we are all here today at a pivotal moment in history, at a time where the urgency of climate change is undeniable, as we have all heard it, seen it and sometimes, felt it.

Ms Sim touched upon the growth of climate finance, the private sector’s role in climate finance, key trends, challenges and legal frameworks of climate finance, and the different modalities of sustainable finance. Pertinently, Ms Sim highlighted that while climate finance has significantly increased, with developed countries mobilising USD106 billion in climate finance for developing countries in 2022, an unprecedented achievement of surpassing the annual USD100 billion goal, there remains a vast gap for climate finance, from the estimated USD8-9 trillion needed annually.

The private sector plays a crucial role, accounting for 49% of climate finance, although challenges such as bankability and fear of greenwashing present hurdles. Ms Sim emphasised the need for regulatory policies and guidelines, as well as harmonised standards globally, to assist in instilling confidence and certainty in the integrity in the use of carbon credits and other sustainable financing tools.

Ms Sim concluded with her hope that collaboration and the sharing of ideas across communities will, together, push us towards a significant and impactful movement, to achieve the goal of keeping global warming below 2.2 degrees pre-industrial levels.

Exploring the intersection of climate change, finance and the law: Corporate governance, just transition and the role of AI

Mr Sivaprasad began the panel discussion (moderated by Ms Low) by highlighting that the movement of international capital, and whether Southeast Asia will continue to be the top destination, will depend on several factors including the development of regulations in the EU, such as those related to carbon border adjustments, corporate sustainability reporting and deforestation. Therefore, Southeast Asian countries must create an environment that attracts multinational companies and investors. Some ways include giving multinational companies access to green electricity and putting in place regulations that give companies the assurance that their supply chains will be compliant with their home regulatory requirements. Looking at investments from a sustainable financing viewpoint, Mr Guwe shared that sustainable financing projects in the Southeast Asian region are currently geared towards green financing. Other types of sustainable financing relate to societal financing such as supporting water infrastructure, affordable housing and food security. There is also a growing trend of sustainability-linked financing which refers to traditional financing with additional loan conditions that push companies to achieve environmental or social targets. Companies are typically incentivised to meet sustainability targets through lower interest rates if such targets are met.

Next, Ms Sim Ting shared that GenZero considers ESG factors in all phases of its investment process. Specifically on corporate governance, GenZero looks at it in a systematic way throughout the pre-investment phase, the investment phase, and the post investment phase to ensure that the integrity of the companies or projects that it invests in are maintained. In the pre-investment phase, the due diligence process will include considering land issues, biodiversity issues and community impact of the projects. Projects that do not meet certain criteria will not move to the investment phase, where safeguards such as voting, information and audit rights are put in place to ensure good corporate governance. Lastly, in the post-investment phase, GenZero monitors the project to ensure that sustainable practices are not reversed.

Professor van Asselt then addressed the rising trend of climate litigation, noting that companies and investors need to consider both direct and indirect risks. Direct risks include reputational damage and a potential decrease in share price following a successful lawsuit, while indirect risks may include revised insurance premiums.

The concept of just transition was also discussed. Mr Sivaprasad expressed hope that the recently launched Taskforce on Inequality and Social-related Financial Disclosures (TISFD) would motivate action by creating transparency on social issues. Mr Guwe stressed the importance of swift enforcement of penalties where a project fails to meet its sustainable targets.

The discussion then shifted focus to the role of AI in climate change. Ms Sim Ting shared her view that there is a place for AI in climate change and that the tension between the energy use for AI and the efficiency that comes with AI is a right one. With AI, some projects could be enhanced and made more scalable. Ms Sim further noted that AI technologies are already being utilised in district cooling systems to enhance grid efficiency and reduce energy leaks, and to monitor carbon sequestration. Professor van Asselt noted that regulatory frameworks should be put in place to address the social, legal and ethical implications arising from the use of AI and when developing AI regulation, jurisdictions need to ensure that positive impacts are maximised while negative impacts are minimised.

Closing remarks

Rounding off the day’s impactful discussion, Professor Lee Pey Woan (Dean of the SMU Yung Pung How School of Law) expressed gratitude to all of the speakers for a fruitful discussion of how we may build a sustainable future for everyone and emphasised the gravity of climate change.

This year’s Dentons Rodyk Dialogue focused on what is arguably the most pressing challenge of our time, posing a profound threat to ecosystems globally today, and tomorrow. It is hence imperative that climate change remains a constant topic of discussion, for us to forge a new way forward. As emphasised during our panel discussion, the cost of inaction is more than the cost of action when it comes to climate change.