Local banks satisfy at least 50% of criteria in sustainable banking study: WWF

THE three Singapore banks and a Thai financial institution are the only ones out of the 35 Asean banks assessed that have met at least half of the criteria in a WWF study on banks' environment, social and governance (ESG) integration performance.

WWF noted that UOB, OCBC and DBS in particular have demonstrated leadership in sustainable banking by prohibiting the financing of new coal-fired power plants and implementing no-deforestation commitments, unlike 91 per cent of their peers.

However, the Sustainable Banking Assessment (Susba) report by WWF released on Wednesday showed that the 35 banks studied are not responding fast enough to threats such as environmental degradation and climate change, based on a framework of purpose, policies, processes, people, products and portfolio.

Financial instability and social unrest might result if these threats are not tackled timely, WWF said.

In the study, only the Singapore banks and Thailand's Kasikorn Bank satisfied at least half of the 70 criteria in the framework and 51 per cent of the banks met less than a quarter of the criteria. However, 74 per cent of the Asean banks made improvements compared to last year.

Singapore banks as a whole improved in all but one aspect: people's responsibilities in ESG.

Singapore lenders' pledge not to provide funding to new coal-fired power plants and their commitment to no deforestation have been highlighted by WWF.

By contrast, economies in Asean are highly dependent on fossil fuels, which contribute significantly to climate change. Only 9 per cent of the banks in the study have developed a strategy to manage climate-related risks or conducted climate-risk assessments, even though regulators are increasingly expecting banks to test the resilience of their loan books against climate risks and report the results.

WWF commented that Asean banks were leaving money on the table by not actively supporting the urgently needed transition to a low-carbon and sustainable economy, as the conservation organisation observed that 51 per cent of the banks assessed offering green financial products have mostly focused on renewable energy but there remains a huge financing gap in other sectors such as infrastructure, energy efficiency, food, agriculture and land use.

Susba was launched in 2017.