The WWF has released its 2019 Sustainable Banking Assessment, which states that ASEAN banks are delaying their response regarding the funding of environmental sustainability projects.
The report analyses the response to climate change and environmental degradation by some 35 ASEAN banks.
Climate change if ignored will result in financial instability and social unrest, according to the study.
The assessment looks at six factors namely purpose, policies, processes, people, products, and portfolio by the banks in addressing the impacts of climate change.
Key study findings include:
- Of the 35 banks assessed, only 4 banks from Singapore and Thailand fulfilled at least half of the study’s 70 criteria and 51% of the banks fulfilled less than a quarter
- 74% of the banks made some improvement compared to last year. Some of the banks have prohibited the financing of new coal-fired power plants
- ASEAN banks are also not actively supporting the urgently needed transition to low carbon and sustainable economy
- The demand for green investment is likely to reach $3 trillion from 2016 to 2030 (infrastructure, renewable energy, energy efficiency, food, agriculture, and land use)
- 51% of banks that offer green financial products have mostly focused on renewable energy. There is a gap in other sectors
- Only 9% of banks have developed a strategy to manage climate-related risks or conducted climate-risk assessments
- By the end of 2019, seven banking associations or regulators in ASEAN will have issued sustainable banking guidelines
- ASEAN economies remain highly dependent on fossil fuels as 91% of ASEAN banks continue to finance new coal-fired power plants and increase their exposure to climate-related transition risks such as carbon taxes
- Banks are laying the foundations for good governance of ESG issues with 57% of banks having senior management oversight of ESG issues, nearly half of which have additional responsibilities over climate-related risks and opportunities
- Investors are increasingly engaging with banks on their management of climate and environmental risks
- ASEAN banks are also not adequately managing water-related risks. Just 17% of banks recognise water risk and none require clients to conduct water risk assessments
“ASEAN’s economies are very much interdependent, which magnifies the effects of climate change and environmental destruction. To ensure that businesses are resilient and the people of ASEAN have a secure future, ASEAN banks need to manage climate and other material environmental risks and opportunities in their portfolios,” said Jeanne Stampe, WWF’s head of Asia Sustainable Finance.
Alistair Thompson, director of First State Investments (Singapore) said, “The WWF Sustainable Banking assessment has proven to be a valuable tool for us in ASEAN. It allows us to track where progress is being made, or not, and the areas in which investors like ourselves can push for improvement. We have used it to engage in areas such as Thermal Coal and Palm Oil.”
Climate change and measures to address it will be discussed at the Asian Utility Week and POWERGEN conference, click here for more information or to register to attend.