Stockholm 2024 Asia-Pacific Focus
27 August (Tues) 9:00-10:30 CEST
co-conveners: APWF, CDP Global, Yachiyo Engineering

Session Overview

This session discussed sustainable finance for water security through standardized reporting and accountability. It particularly explored how countries in Asia and the Pacific can capitalize on the alignment of global reporting standards that hold finance and investment accountable for climate and sustainability goals and commitments. Financing water security and climate adaptation redefine financial institutions’ strategic focuses. Against the backdrop of escalating insecurity challenges, the key lies in ensuring the delivery of commitments, propelling Asian and Pacific countries towards a water-secure future. A promising development arises as regulators in major economies and financial markets move towards standardizing financial and nonfinancial reporting and disclosure. This shared initiative holds finance and investment accountable for meeting sustainability and climate goals. Commitments extend to financial capital, performance, and outcomes resulting from investments. For the Asia-Pacific region, capturing this opportunity has become imperative.

The session discussed the challenges and prospects for implementing global reporting standards on corporate activities related to climate change, water risk, and sustainability issues in the Asia-Pacific region. It also addressed the challenge and the pathways to mobilize financial and investment funds to tackle climate change from a water perspective, ensuring accountability through these standards.

Keynote presentation

Firstly, Dr. Patricia Calderon, Head of Water, CDP, delivered her keynote presentation. She highlighted global and Asia-Pacific trends in water-related disclosures, emphasizing the increasing importance of corporate transparency on water risks and opportunities for companies.

CDP, a global not-for-profit organization, collects environmental performance data from companies, suppliers, financial institutions and local governments. This data, gathered through annual water-related questionnaires, is aligned with TCFD and partially aligned with TNFD, helping investors make informed decisions and encouraging corporate action on water security.

While water-related disclosures are becoming more critical, current regulations remain insufficient, especially across the G20+ nations. CDP continues to drive water sustainability through initiatives like the Ambition Loop Project and the Valuing Water initiative, aiming to enhance global corporate water stewardship and political ambition.

In 2023, CDP invited 13,000+ companies to disclose their water-related data, a significant increase from the previous year, with 4,800+ companies effectively disclosing. Despite this growth, major companies such as Apple, Tesla, Shell, Nike, and Amazon failed to disclose. Regional increases in disclosure were strongest in Europe (31%) and Asia (26%).

CDP also highlights the need for improved supply chain incentives. If a third of companies reporting set water-related requirements for suppliers, only 5% of companies currently incentivize suppliers to take water action. The organization advocates for financial incentives, such as supplier bonuses or legal provisions, to bridge the resource gap between buyers and suppliers.

Her keynote also emphasized financial institutions’ crucial role in driving water sustainability by integrating water into their strategies and governance. We are pushing financial institutions to assess water risks and engage with their portfolio companies through initiatives like the Valuing Water initiative.

CDP’s insights into water security data empower companies and capital markets to assess and manage water-related risks and opportunities. By driving transparency and action, CDP helps align business practices with a water-secure future.

Cases from Japan and Indonesia

Two case studies from Japan and Indonesia showcased efforts to align corporate practices with sustainable water management. Japan leads globally in CDP water security disclosures, while Indonesia focuses on improving water resilience through localized initiatives such as the Forward Faster Water Resilience Targets. Both countries face challenges, particularly in supply chain management and meeting international standards.

Mr. Hirohito Yoshida, Manager of Sustainability Department, Yachiyo Engineering

Japan leads globally in CDP water security, with 36 of the 101 companies achieving an A score in 2023. The number of Japanese companies disclosing information to CDP has grown annually, with 513 companies participating in 2023.

A survey of Japanese companies revealed that most disclosed voluntarily, with 50% aiming to improve their brand image, 20% seeking to understand required actions better, and another 20% motivated by competition. It demonstrates that disclosure is seen as beneficial for enhancing corporate reputation.

As a sustainability consultant, I have supported clients in improving their CDP scores, helping them overcome initial challenges such as assessing water risks, setting water targets, and improving water efficiency. These companies enhanced their water risk preparedness through tools like AQUEDUCT and customized questionnaires, contributing to improved CDP ratings.

The survey also showed that over 80% of respondents could identify their company’s water risk level, 60% reported better sustainability assessment scores, and 55% identified necessary environmental actions. This highlights the value of CDP disclosure in guiding Japanese companies toward sustainable practices. While CDP is gaining traction in Japan, the hope is for broader adoption across the Asia-Pacific region.

Mr. Gregorius Gilang S. Nugroho, Manager – Sustainability and ESG, UN Global Compact Network Indonesia (IGCN) introduced the IGCN initiatives. As one of their members’ examples, Ms. Lely Fitriyani, Research And Development Manager, PT. Prasadha Pamunah Limbah Industri (PT. PPLl) introduced her company’s efforts.

Mr. Gregorius Gilang introduced the IGCN initiative aims to localize and accelerate global water resilience through the Forward Faster Water Resilience Targets, launched under the CEO Water Mandate. The United Nations Global Compact, represented by the Indonesia Country Network, plays a key role in driving sustainable business practices in water stewardship, environmental sustainability, and corporate governance. With 162 members, the Indonesia Country Network supports businesses in advancing the SDGs, particularly those related to water resilience.

At the halfway mark to 2030, the world is off track in achieving the SDGs, especially regarding water resilience. Poor water quality, scarcity, and inadequate sanitation pose significant risks to communities, ecosystems, and businesses. The Forward Faster initiative aims to create positive water impact in at least 100 vulnerable water basins by 2030. These basins have been selected based on risks related to water quality, quantity, accessibility, and climate vulnerability, including biodiversity concerns.

The initiative encourages companies to take coordinated action, share learnings, and measure their impact using a common, validated approach. Accountability and transparency are emphasized, with companies required to set, achieve, and report specific water-related targets in their operations, supply chains, and local communities annually.

A key aspect is localized reporting, which ensures that companies prioritize water basins where they have the most significant impact. One such basin is the Java Basin in Indonesia. To date, 69 companies across Asia and Oceania have committed to the target, with 10% being Indonesian companies.

PT. PPLl, a wastewater management company, has committed to the Forward Faster Water Resilience Targets, which is crucial in improving water quality and accessibility in the basins they operate. Their efforts align with the broader goals of water resilience and sustainability, serving as a model for other companies in Indonesia.

Ms. Lely Fitriyani, Research And Development Manager, PT. Prasadha Pamunah Limbah Industri (PT. PPLl) talked as a member of the IGCN, PT. PPLl, is addressing water scarcity through innovative water recycling methods. Operating for over 30 years, PT PPLI prioritizes compliance in waste and wastewater management, focusing on minimizing environmental impact, especially on the Cileungsi River, and reducing groundwater consumption through proactive monitoring and protection of groundwater quality.

PT PPLI voluntarily tracks its water usage, including rainwater and recycled water, and reports its data to the government biannually. They have successfully recycled more than 15,000 cubic meters of water annually, doubling the volume of water recycled compared to their groundwater intake. They utilize an evaporator-plus-bio plant system to treat high-TDS and high-COD wastewater, achieving near-zero discharge during hot seasons.

In addition, PT PPLI provides water treatment services to remote oil and gas drilling sites, ensuring wastewater meets high-quality standards. Despite achieving excellent water quality, local communities hesitate to use recycled water due to cultural beliefs.

PT PPLI’s commitment to water conservation reflects the importance of water for daily life and cultural significance in Indonesia. Their continued efforts aim to reduce groundwater intake and enhance water recycling.

Panel Discussion

The panel discussion explored how standardized reporting, regulations, and financial incentives can drive progress on water security.

Dr. Patricia Calderon, Head of Water, CDP, moderated the panel discussion.

In addition to the above speakers, Ms. Åsa Knudsen Sterte, Senior Advisor Climate and Sustainable Finance at SEB and Ms. Gay Santos, Regional Director South East Asia, water.org, joined the panel discussion, sharing their experiences in financial institutions.

Q1 to Ms. Asa Knudsen Sterte about the European perspective on the evolution of regulations and their global impact

Reflecting on her extensive experience with European regulations, particularly from negotiations of the Green Taxonomy and financial disclosure standards, she highlighted the European Union’s commitment in 2015 to achieving net zero emissions by 2050 and the strategy of engaging the private sector, particularly through financial investors, rather than directly changing company regulations.

She shared that the first set of disclosure regulations, the Sustainable Finance Disclosure Regulation (SFDR), requiring investors to report how they incorporate sustainability into investment decisions and the Green Taxonomy, a classification system defining activities considered green was proposed already in 2018 and gradually implemented from 2021. The Corporate Sustainability Reporting Directive (CSRD) that will be gradually implemented from 2024 applies directly to companies. Although there was initial criticism of starting with investors instead of companies, she believes this approach helped drive negotiations on CSRD and the development of sustainability standards (ESRS). The demand from investors created pressure for companies to comply with sustainability disclosures.

She noted that the EU’s early action had a significant global impact, with similar taxonomies emerging in different regions. The release of international standards, such as the ISSB standards, highlights the importance of creating a level playing field for investors and corporates which is now underlining some of the criticisms of the EU regulations, particularly around the complexity, administrative burden, and data challenges.

Despite these challenges, she viewed the EU’s pioneering role as a positive first step, emphasizing that perfection should not be expected from the start. While the regulations are imperfect, they initiated essential action in sustainable finance. The key concern going forward is ensuring that the focus on disclosure does not overshadow the real goal of driving behavioral change in companies.

In conclusion, she emphasized that while the regulations may sometimes be seen as an administrative burden, they remain an important tool for driving long-term sustainability and underscored the importance of balancing reporting requirements and actual company action- a consideration that needs to be part of the continoius development of reporting standards.  

Q2 to Mr. Yoshida and Mr. Gregorius, “Given your experience in both the Japanese and Indonesian markets, which likely operate with distinct perspectives, how have these markets, and Asia more broadly, responded to the regulatory push coming from Europe? “

Mr.Yoshida responded that Japanese companies are actively preparing to respond to various standards, such as the CSRD from the European Union. They are increasingly ready to adopt these European regulations. However, Japan has historically been more inclined to follow international standards than create its own. That said, some Japanese companies are showing a growing interest in exploring the possibility of developing their standards. Several Japanese companies are leading globally, particularly in the CDP water security questionnaire, where they rank at the top.

Mr. Gregorius Gilang responded from an Indonesian perspective, we’re observing that many companies, especially those with significant exposure to EU markets, are becoming increasingly aware of the need to align with evolving regulations. These companies are proactively seeking guidance to prepare for this new landscape. They understand that complying with these standards is essential to maintain access to European markets and stay competitive globally. However, most companies in Indonesia, particularly SMEs, are still struggling to meet local regulatory requirements. The regulatory environment here can be complex, and adding international standards, such as those from the EU, only adds to the challenge. It highlights the need for clear guidance and capacity-building initiatives to help Indonesian companies bridge the gap between local and international compliance. Ongoing dialogue and collaboration between stakeholders in Indonesia and Europe will be essential in assisting companies to navigate these challenges and take advantage of the opportunities that come with adhering to new standards.

Q3 to Ms. Åsa Knudsen Sterte about standardized disclosure’s challenges and opportunities, particularly regarding data availability and quality.

She replied a major challenge is balancing comparability and relevance—if data is highly comparable, it may not be relevant for everyone, and vice versa. She suggests starting with fewer key performance indicators (KPIs) on a mandatory level, allowing companies to focus on collecting essential data through their value chain. This approach could improve data availability over time, as seen with emission disclosures.

For financial institutions, regulations and standards are valuable tools in advisory services and product development. Investors are increasingly looking for standardized metrics, such as emissions to water, encouraging companies to prioritize collecting and reporting this data. In addition, performance-linked products, such as sustainability-linked bonds and loans, benefit from aligning with these KPIs, reducing administrative burdens and creating synergies between compliance and product offerings.

In summary, while there are challenges with data availability and standardization, a focused approach to KPIs and alignment with evolving regulations presents significant opportunities for both companies and financial institutions.

Q4 to Mr. Hirohito Yoshida and Mr. Gregorius, “What are the challenges of standardized reporting in enhancing accountability and transparency for the private sector in Japan and Indonesia, particularly regarding supply chains?

Mr. Yoshida responded that many companies are proficient at managing water within their own operations, but they are not yet up to standard when managing their supply chains. It presents a significant challenge moving forward.

Mr. Gregorius responded that the IGCN has been working to advance accountability and transparency through initiatives like ‘Forward Faster Water Resilience Targets.’ This program aims to inspire Indonesia’s private sector to set ambitious goals that contribute to accelerating the SDGs. However, setting targets is only the beginning. To ensure these targets are met, robust reporting is essential. Simplified reporting formats have been introduced to recognize companies’ challenges in reporting, particularly in complex areas such as water stewardship and carbon accounting. These formats make progress tracking more accessible and integrated, helping companies report their achievements more effectively.”

Q5 to Ms. Gay Santos, Regional Director of Southeast Asia for Water.org, “How can standards help mobilize capital for improving water, sanitation, and hygiene (WASH) services, and what are the opportunities and challenges involved? “

She highlighted a significant financing gap in meeting SDG targets, particularly for water and sanitation. Market-driven solutions are essential to address this, such as providing loan products through financial institutions to reach underserved communities and supporting small and medium-sized enterprises (SMEs) in the water sector.

Standards play a key role in unifying efforts towards the SDGs. One critical standard involves setting clear and tangible metrics to measure progress, such as access to water and sanitation and the financing mobilized to support these efforts. Behavioral change among stakeholders is also crucial, as exemplified by the concept of water stewardship, where private sectors are encouraged to use water equitably, environmentally sustainable, and economically beneficial.

Another challenge is access to finance for SMEs in the water sector, which often struggle with the requirement for hard collateral. Enabling policies, such as secure transaction reforms, can help SMEs access finance through alternative collateral like cash flow and receivables. Legal standards, such as the World Bank’s Legal Rights Index, measure how countries are implementing reforms to support these enterprises.

In conclusion, standardized metrics, behavioral change, and enabling policies are essential for mobilizing capital and achieving SDG goals, particularly in the WASH sector.

Q6 to all Panelists to convey their key messages.

Ms. Åsa Knudsen Sterte highlighted in my previous speech, I mentioned how standardized information disclosures, such as CDP, are incredibly valuable in helping companies identify gaps in their sustainability efforts and realize their full potential. Tools like these are essential for conducting a stocktake of current practices and making improvements for the future.

Ms. Lely Fitriyani emphasized my takeaway is that companies should begin by setting clear targets and then measure progress through reporting. Starting with simple standards is important, and as data is collected, companies can gradually adopt more advanced standards. Despite the background noise, I hope you can hear me clearly. As we continue to advance sustainable finance and water security, we must prioritize developing localized guidelines—keeping them simple but comprehensive enough to capture a broad spectrum of data. The key is to keep moving forward.”

Ms. Gay Santos emphasized that we need to push these initiatives forward. Standardization is crucial so we can all work towards a unified vision and goal for 2030, avoiding a fragmented approach. However, the most critical standard to establish is behavioral, and I strongly advocate for an SDG Purpose-Driven Capital mindset.

Key Takeaways of this session:

• CDP’s global disclosure mechanism is driving greater transparency and corporate action on water security, but there is a need for stronger regulations and incentives to enhance participation.
• Japan leads the way in water security disclosures, while Indonesia is focused on improving water resilience through localized initiatives.
• Standardized reporting, financial incentives, and cultural change are crucial to mobilizing capital for sustainable water management and achieving SDG targets.

Program

Session Introduction
Ms. Yumiko Asayama, Chief Manager, Asia-Pacific Water Forum (APWF).

Keynote Presentation
Dr. Patricia Calderon, Head of Water, CDP

Presentations: Cases

• Mr. Hirohito Yoshida, Manager of Sustainability Department, Yachiyo Engineering
• Mr. Gregorius Gilang S. Nugroho, Manager – Sustainability and ESG, Indonesia Global Compact Network (IGCN)
• Ms. Lely Fitriyani, Research And Development Manager, PT. Prasadha Pamunah Limbah Industri (PT. PPLl)

Panel Discussion

Panelists

• Ms. Åsa Knudsen Sterte, Senior Advisor Climate and Sustainable Finance at SEB,
• Ms. Gay Santos, Regional Director, South East Asia Water.org
• Mr. Hirohito Yoshida, Manager of Sustainability Department, Yachiyo Engineering
• Mr. Gregorius Gilang S. Nugroho, Manager – Sustainability and ESG, Indonesia Global Compact Network (IGCN)
• Ms. Lely Fitriyani, Research And Development Manager, PT. Prasadha Pamunah Limbah Industri (PT. PPLl)

Wrap Up
Ms. Yumiko Asayama, Chief Manager, Asia-Pacific Water Forum (APWF).

(Reporter: Ms. Yumiko Asayama, Chief Manager, Japan Water Forum / APWF Secretariat)