- As Westpac Institutional Bank’s head of sustainable finance, Michael Chen CA helps clients obtain funding from, or invest in, sustainable options including green deposits.
- He also assists in managing ESG (environmental, social and governance) risks across the bank’s customer portfolio, including climate and modern slavery risks.
- Chen says his CA training helps every day as he knows the nuts and bolts of how businesses work and think.
By Rachel Alembakis
In his role as head of sustainable finance, Westpac Institutional Bank, Michael Chen CA oversees the bank’s sustainable finance commitments and environmental, social and governance risk management. He says his training as a chartered accountant informs his thinking every day.
“The science and financial risks and opportunities of climate change are rapidly evolving.”
Q: So what does a head of sustainable finance at a big bank do?
Essentially, there are two parts to my portfolio. The first part I would describe as helping clients obtain finance from, or investing in, sustainable options such as green/social/sustainable bonds, loans, and deposits. The second part of the portfolio is risk-based, helping the institutional bank manage ESG risks in its customer portfolio, such as climate change or human rights related risks.
Q: What sustainable finance projects are you working on at the moment within Westpac Group?
We’re doing a lot of work on continuously improving our response to the recommendations of the Taskforce on Climate Related Financial Disclosures (TCFDs), which includes undertaking climate change scenario analysis and enhancing disclosures. Westpac also has a target of increasing our exposure to climate change solutions to A$10 billion by 2020, which we’ve already surpassed halfway into our climate strategy. To demonstrate our commitment to the long-term transition of the Australian economy, we’ve pledged to more than doubling our exposures to A$25 billion by 2030.
Q: Why is sustainable finance so important to the financial system?
Don’t take it from me – the Reserve Bank of Australia (RBA), the Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) have all publicly said that they view climate risk as a financial risk.
This is also why the 34 central banks and supervisors – including the RBA – have also recently come out to say that “a massive reallocation of capital is required” to ensure that we meet the aims of the Paris Agreement.
This urgency was a driving force behind a game-changing collaboration announced a few weeks ago between Australian banks, insurers, super funds, investors and industry groups to form the Australian Sustainable Finance Initiative. By 2020, the members of this Initiative will publish a ‘roadmap’ for the Australian finance sector to systematically make the transition to a more sustainable economy.
The Australian Accounting Standards Board (AASB) and Auditing and Assurance Standards Board (AUASB) have recently released a joint guidance statement on the relevance of climate-related risks for financial statement accounting estimates.
Q: What keeps you awake at night?
How to create more sustainable finance opportunities for our clients and the emerging risks around the corner that we haven’t turned our minds to yet.
The two issues I think about a lot are climate change and human rights. The science and financial risks and opportunities of climate change are rapidly evolving. We are looking at the resilience of our portfolio under various scenarios. We are also working with our clients on green finance opportunities. As for human rights, it is so broad and prevalent along the value chain, so being able to identify where the key risks are and whether they are within one’s control can be quite challenging.
Q: The Modern Slavery Act came into effect in January of this year. Entities with annual revenues above A$100 million will have to assess and disclose their exposures to modern slavery along their value chain. What has this meant for you in your role?
Westpac has a Human Rights Position Statement that outlines our approach by role (e.g. employer, buyer, financial services provider, etc.). My team’s focus is specifically on considering human rights in our financing activities, so we are often engaging with customers on how they’re managing human rights risks and capabilities. Westpac Group has also reported against the UK Modern Slavery Act for the past few years.
Q: How has your training as a CA helped you in your current role?
Michael Chen CA
The CA program is very rigorous, it helps you understand the nuts and bolts of how a business operates and how it thinks, which is fundamental working in sustainable finance.
Q: What other qualifications do you need to work in sustainable finance?
In general, just being a good clear thinker with a good grasp of business and finance. Personally, I have degrees in business [from UTS] and sustainability leadership [from the University of Cambridge]. It’s not a must, but some kind of broad training in sustainability is useful.
Q: What personal qualities do you think make a person well suited to the role?
You’re often having to work across many subject areas – debt products, risk, credit, regulation, sustainability, etc., so effective communications and an ability to join the dots is a must. Being client-centric is important, and lastly, given it’s quite a nascent industry, having a passion to create positive impacts through finance is very important.