Banks are crucial in ‘greening’ entire value chains in transport and food sectors

By Elaine Lam

THERE is no question that corporations globally need to reduce their greenhouse gas emissions to help mitigate climate change. There is also a growing awareness that banks and other institutions can help unlock the capital needed to transition to a more sustainable future while ensuring that businesses thrive.

Large companies have made strides in their sustainability efforts, which in recent years have been supported with large commitments by banks for sustainable financing. There has thus been significant growth in sustainable financing portfolios targeted by many banks. OCBC, for one, has committed to growing our sustainable financing portfolio to S$50 billion by 2025 from S$34 billion last year.

Now, in order to accelerate the adoption of sustainable solutions to meet net-zero targets, banks would do well to take an ecosystem approach. The provision of capital can help large companies (which are often the industry leaders) to enable a shift to sustainable operations. This in turn would positively impact and improve the sustainability practices of small and mid-sized firms as well as influence the provision of sustainable products for the consumer.

Two sectors to keep an eye on are transport and food – and for good reasons. These are close to our everyday lives while having their fair share of sustainability issues. They are also under pressure to quickly adopt sustainable solutions.

The transport sector

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Many countries are electrifying their vehicle populations and ramping up their investments across the electric vehicle (EV) value chain. Banks have a crucial part to play in this journey, and we are making efforts to support the industry end-to-end.

Charging infrastructure is an area where banks have already worked with solution providers to make a difference, given that the availability of charging stations is a key concern impeding widespread adoption of EVs. Through innovative and comprehensive financing packages which cover both charging solutions and EV production, banks can further support the build-out of the ecosystem for consumers and businesses in a holistic manner.

For banks, this means financing sub-sectors such as transition metals. High up the value chain, sourcing necessary base and precious metals such as cobalt and lithium is critical in EV production.

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We work with our partners and clients to encourage and incentivise such business activities, while being conscious about associated ESG risks from the supply chain.

A large-scale conversion to EVs means going beyond thinking of the consumer of passenger vehicles.

More can be done to support businesses that require vehicles in their daily operations. Singapore’s goods vehicles population stands at around 144,000, of which only 387 are EVs. OCBC thus works in partnership with EVCo – run by Strides Mobility, a business arm of SMRT Corporation, and DST Electric Vehicle Rental in Shenzhen – which offers EV leasing options for commercial businesses that can be structured towards actual vehicle ownership in the long term.

Such aid gives companies access to salient end-to-end solutions for their electrification transitions and further expands options for companies to partner with banks to impact the value chain.

A focus on the food ecosystem

There has been a strong focus on sustainable food with heightened interest from governments, institutions and consumers. OCBC aims to connect capital to enable innovation in the food space, and is doubling its loan portfolio in sustainable food by 2025.

However, since the food ecosystem is large and complex, it must be approached with a holistic view. Besides investing in technology to modernise production in a sustainable manner, traditional agri-food companies are developing stronger partnerships within the food ecosystem, expanding their supply chain oversight and establishing presence in new food areas. This ultimately complements their core businesses and banks encourage such corporate clients on this journey by offering them sustainability-linked financing.

Conventional market players have great reservoirs of knowledge and investment resources, and strong experience in market demand and supply chain delivery. These established firms complement the start-ups in the alternative food and agri-tech space, which can be more agile, innovative and knowledgeable in specific areas. In fact, the large corporates sometimes invest in the start-ups, and together, they stand to enable an efficient development of lasting new food solutions of enterprise value.

Banks also actively engage various other stakeholders such as innovators, investors, regulators and technology providers, especially when they can cross-pollinate ideas that benefit the ecosystem as a whole.

One such example is our strategic partnership with Proterra Asia – the Asian arm of Proterra Investment Partners, a global private equity fund manager with investment focus on food and agri-business. The partnership aims to grow and transform the agriculture and food ecosystem in Asia via investment and corporate banking opportunities alongside funds managed by Proterra Asia.

Creating a better world for us all

As green mobility and sustainable solutions in food gain momentum globally, banks can help integrate opportunities in these areas by expanding sustainable finance coverage and stepping up partnerships in new economy ecosystems.

The pay-off in such partnerships, for banks, is helping to drive synergy in sustainable value chains. As we like to say at my place of work, we must all do our part; creating a sustainable world is all in our hands.

The writer is OCBC Bank’s head of global corporate banking