ASEAN banks needed in climate change fight

09 October 2017 | Research
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The report, by WWF and NUS Business CGIO, urged banks to align their practices more closely to climate change and sustainable development goals

The banking regulations and practices in six ASEAN countries do not reflect the commitment of the individual nations in the fight against climate change and the move towards sustainable development goals, a report by the World Wildlife Fund (WWF) and NUS Business School’s Centre for Governance, Institutes and Organisations (CGIO) has revealed. The report warned that robust sustainable banking guidelines and urgent actions by banks are necessary to prevent a looming environmental and social crisis that might cripple the region’s future economic growth.

Professor Tommy Koh, Ambassador-At-Large at the Ministry of Foreign Affairs, Champion of the United Nations Environmental Program and Rector of Tembusu College explained, “Banks have the power and responsibility to influence business practices and transform the region’s approach to development. With ASEAN’s food, water and physical security at stake, I urge the finance sector to take the necessary measures and be part of the solution.”

In a survey of 34 banks across ASEAN, the researchers discovered that none of the banks disclosed how they manage climate or sustainability risks at the portfolio level. Furthermore, although 26 banks refer to sustainability in their strategy or vision, only 12 acknowledge the importance of climate risk for society and businesses. The six ASEAN nations studied were Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

The report thus urged banks to pay closer attention to Environmental, Social and Governance (ESG) integration. This would involve a better alignment of their strategies and portfolios to climate and sustainable development goals.

Corporate governance guidelines have been quite consistent and prescriptive across the six countries, which creates a solid foundation for ESG integration. Regulators and policy makers should adopt similarly prescriptive guidelines to advance the adoption of sustainable banking practices in their countries.

Jeanne Stampe, WWF’s Head of Asia Finance and Commodities, said that without the finance sector playing its part, countries will not have any chance of meeting their commitments to the Paris Climate Accord and the UN Sustainable Development Goals. “There remains four years from now to stay below a 1.5 degree temperature rise as adopted in the Paris Agreement. Banks must therefore act now and develop robust sustainable banking practices within the next 12 months,” she added.

While regulatory frameworks like corporate governance and reporting guidelines already exist in the six ASEAN countries, not all countries have sustainable banking regulations, the report further stated.

“Corporate governance guidelines have been quite consistent and prescriptive across the six countries, which creates a solid foundation for ESG integration. Regulators and policy makers should adopt similarly prescriptive guidelines to advance the adoption of sustainable banking practices in their countries,” Associate Professor Lawrence Loh, Director of CGIO commented.