ASEAN banks lack progress in green finance

Only 62% of banks have assigned sustainability strategy to senior management.

Financial regulators of five ASEAN countries are bolstering their regulations against rising environmental and social (E&S) risks but many banks are struggling to keep up the pace, a WWF Singapore report revealed.

Regulators in the five countries placed explicit standards on climate change and environmental degradation as part of E&S issues that banks need to address. More than half (62%) of 29 banks in WWF Singapore’s study recognise climate risks and 48% recognise environmental degradation risks. But only 62% of banks have assigned responsibility of their sustainability strategy implementation to their board or senior management, and less than half (34%) have a dedicated E&S team.

Also read: ASEAN banks perform poorly in environment sustainability survey

In four countries, namely Malaysia, Singapore, Thailand and Vietnam, less than half (43%) of banks mentioned have E&S policies, while only a measly 15% disclose such policiesWWF stated that regulators in the five countries should aid the progress of banks in terms of the latest Sustainable Banking Assessment (SUSBA) published last August.

“Most ASEAN banks lack the strategic understanding of the E&S risks associated with their business activities and may be dramatically exposed given the lack of robust E&S policies,” the report said.

In addition, only three ASEAN banks - DBS, OCBC, and UOB in Singapore - support the Task Force on Climate-related Financial Disclosures (TCFD), and other banks do not generally reveal their TCFD-related findings.

To solve this problem, banks in Malaysia, Singapore and Thailand are now expected to assess and mitigate their portfolio-level exposure to climate-related or other E&S risks. So far, only two banks across ASEAN have conducted and disclosed such assessment.

Furthermore, incentives such as green and sustainable bond grant scheme are given to support financial sustainability in Singapore and Malaysia. In Indonesia, Thailand and Vietnam, financial regulators are considering developing additional measures to promote green finance.

The study gauged the guidelines set by regulators or banking associations in Indonesia, Malaysia, Singapore, Thailand and Vietnam based on a new WWF framework of 25 indicators on six categories: scope, strategy & governance, policies & processes, portfolio risks & impacts, disclosure & transparency and enabling environment.