ABS launches initiative for banks to engage clients on environmental issues

THE Association of Banks in Singapore (ABS) on Thursday (Apr 21) unveiled an industry standard questionnaire for banks in Singapore to engage their corporate clients on environmental risk issues.

Called the ABS Environmental Risk Questionnaire (ERQ), the industry standard template is designed to gather data points and identify opportunities to finance Singapore’s transition to a low carbon economy.

It is applicable to high-risk sectors as identified by the Green Finance Industry Taskforce (GFIT), namely: agriculture and forestry/land use, construction and real estate, transportation and fuel, energy (including upstream), and industrial.

In its first iteration, the ERQ lays out basic-level questions to enable easy adaptation by the banking industry and corporates.

There is also an accompanying guide to provide clarity on and facilitate implementation of the ERQ.

Banks are recommended to apply the questionnaire to customers with which they have a credit exposure of US$10 million and above. They may adjust this threshold according to their own environmental risk materiality assessment, and exercise discretion in identifying questions as either mandatory or optional for their corporate customers.

Members of ABS are also encouraged to adopt the ERQ or incorporate the proposed questions in their existing internal frameworks “as soon as practicable”, said the association.

According to ABS, the ERQ was developed over several months by a workgroup comprising Citibank, DBS, HSBC, OCBC, Standard Chartered and UOB.

These banks are also members of the GFIT, whose key deliverables include an industry standard questionnaire to help the industry in embedding the Monetary Authority of Singapore’s (MAS) environmental risk management guidelines.

HSBC chief risk officer Gautam Mukharya and Vincent Loh, chief risk officer for Singapore and Asean at Standard Chartered, say feedback received on the questionnaire has been "very positive" so far. Both Mukharya and Loh are co-chairs of the GFIT Risk Management Workstream.

"This is a leading example of the industry in Singapore defining its baseline expectations and adopting a consistent approach for gathering environmental risk data... We look forward to supporting more advanced versions of the ERQ, as well as taking the process digital in the near future," they said in an emailed statement on Thursday.

Subsequent versions of the ERQ are expected to evolve to include more detailed questions, including sector-specific addendums for “hard-to-abate” sectors such as energy, said ABS.

Separately, ABS intends to work with GFIT, MAS and other stakeholders on how data requested by the questionnaire may be obtained centrally on behalf of the industry in a digital format.

This will be done via a central data repository under MAS’s Project GreenPrint – a technology platform aimed at promoting a sustainable financial ecosystem – and shared with lending banks after seeking client permission.

Such an approach will significantly streamline the process, avoid duplication and improve data quality, said the association.

Overall, ABS believes its ERQ will help to establish a best practice for banks in Singapore to engage their clients in assessment and mitigation of their environmental risks.

The association envisages this standardised format will enable environmental risk information to be obtained and held centrally, shared digitally to the lending banks, as well as benchmarked across the industry in the future.

Goh Gek Choo, executive director of MAS, hailed the ABS ERQ as an "important first step" for banks to facilitate their customers’ transition to a sustainable future by obtaining “reliable and comparable data to assess risks, identify opportunities, and enable the right actions”.

“As data needs evolve, continual industry effort will be needed to enhance the ERQ over time,” she added.