REPORT: Sustainable finance in Singapore, Malaysia and Indonesia: A review of financiers' ESG practices, disclosure standards and regulations
Whether it is air pollution in China, haze in Singapore, or water scarcity in India, the evidence that environmental and social issues present growing risks to economic growth is mounting across Asia. Global banks and international institutional investors have begun to address these issues in their financing and investment decision-making processes. It is time for domestic and regional financial institutions to play their part.
This report’s primary audiences are the domestic providers of capital – banks and investors – and financial regulators of Singapore, Indonesia and Malaysia. It focuses on the extent to which these capital providers are considering sustainability in their financing and investment activities, and the adequacy of sustainability reporting requirements in light of existing disclosure levels on material environmental and social issues.
The report uses the palm oil, timber and pulp & paper sectors as central case studies as these sectors are important for both the domestic economies and as key players in managing risks to the region’s globally important tropical forests. The report bases its assessments on public disclosure.
There is a strong case for banks and investors to address environmental, social and governance (ESG) issues in assessing companies for loans and investment. International financial institutions have begun to do so. Domestic banks and investors are lagging far behind.
This is clear for palm oil, timber and pulp & paper companies, where there is an increasingly accepted commercial rationale for improved management of ESG issues such as those laid out in WWF’s 2050 Criteria. Yet as a group the leading companies from these sectors listed in Singapore, Indonesia and Malaysia provide insufficient relevant disclosure for investors to assess their management of material ESG issues.
International investors have sought to address these disclosure gaps through engagement and collaborative initiatives. There is no evidence that domestic investors have taken such steps.
Similarly the global banks reviewed all have policies on financing forest-related commodity companies. Yet only one of the domestic banks appears to have this type of policy.