ASEAN banks the missing link in addressing region’s FLAWS
Urgent action needed by ASEAN’s banking sector to achieve climate change and sustainable development goals
Bangkok, Octobre 3, 2017 – Whilst governments in the region have committed to climate change and sustainable development goals, more must be done by the ASEAN banking sector if those commitments are to be reached. According to a WWF report released today, robust sustainable banking guidelines coupled with urgent action by banks are needed to prevent a looming environmental and social crisis that could cripple the region’s future economic growth.
The report, “Sustainable Banking in ASEAN: Addressing ASEAN’s FLAWS’” by WWF and the NUS (National University of Singapore) Business School’s Centre for Governance, Institutions and Organisations (CGIO) finds that national commitments to climate change and sustainable development are not well reflected in the practices of ASEAN banks, nor in the region’s banking regulations.
Even as ASEAN governments gear up to mitigate the impact of worsening environmental issues on their populations, banks continue to narrowly define and manage environmental risks. This contributes to environmental degradation such as climate change, which will exacerbate business risks for these banks and their clients over the longer term.
Through the report, WWF calls for banks to expand their approach to Environmental, Social and Governance (ESG) integration. This requires moving beyond managing short term risks towards embedding sustainability into their strategy and aligning their portfolios fully with the Paris Agreement and SDGs.
While 21 of the 34 ASEAN banks analysed acknowledge that the activities they finance can have adverse environmental and social impacts, none of the banks disclose how they manage climate or sustainability risks at the portfolio level. Further, even though 26 banks refer to sustainability in their strategy or vision, only 12 banks acknowledge the importance of climate risk for society and businesses, of which only one has senior level oversight of climate risks. Shareholders increasingly expect banks to disclose how they manage climate risks in their portfolio as these impact the financial viability of the banks.
Jeanne Stampe, WWF’s Head of Asia Finance and Commodities, said, “Countries will not have any chance of meeting their commitments to the Paris Climate Accord and the UN Sustainable Development Goals without the finance sector playing its part. There remains only four years from now to stay below a 1.5 degree temperature rise as adopted in the Paris Agreement. Banks must therefore act now and develop robust sustainable banking practices within the next 12 months.”
WWF stands ready to work with all of the banks in ASEAN to build capacity on ESG integration and improve understanding of key ESG issues such as climate, water and deforestation. WWF also calls for ASEAN’s regulators to implement prescriptive and time-bound sustainable finance guidelines in order to ensure the wider banking sector is making consistent progress towards these goals.
Regulatory frameworks in the form of corporate governance and reporting guidelines are already present in all six countries to support ESG integration. However, not all countries have sustainable banking regulations in place. Regulators can build upon this foundation to incentivize banks to create an ESG integration framework based on robust standards and science based targets.
“This report will help banks in Thailand to see the trend and the development of ESG in the banking sector in the ASEAN region more clearly. Also, it allows the banks to form an idea on their own ESG development plan which aligns with the global direction of sustainability. WWF Thailand is pleased to work with all banks in order to support the ESG program implementation in the country.” Said Yingyong Vityananan, WWF–Thailand Sustainable Finance Manager.
A 2016 study by the Asian Development Bank projects climate change could lead to annual economic losses equivalent to 6.7 per cent of ASEAN’s gross domestic product by 2100; well over the projected global average of 2.6 per cent. Increasing fossil fuel-based energy production, deforestation-intensive agricultural commodities production, and unsustainable hydropower dams will exacerbate these losses. ASEAN banking sector must use the power of its balance sheet to protect ASEAN’s future.
About the report
WWF’s ‘Sustainable Banking in ASEAN: Addressing ASEAN’s FLAWS’ report reviews the sustainable finance regulatory landscape in the ASEAN region to shed light on the ESG integration progress of banks and their alignment to sustainable development. It assesses the disclosure of banks from six ASEAN countries against a set of indicators that represent the fundamental pillars of sound corporate governance practices and robust ESG integration pillars.
Only publicly available disclosure in the English language in the form of 2016 annual reports, sustainability or CSR reports released before 30 June and information posted on corporate websites were taken into consideration for this assessment
For more information, please contact:
Niramon Soonyakrai; (094 639 4993, (+66) 2619 8521-2 Ext. 607)
Nichanan Tanthanawit; (+66) 2619 8521-2 Ext. 322, (+66) 83 816 0006
WWF is one of the world’s largest and most respected independent conservation organizations, with over 5 million supporters and a global network active in over 100 countries. WWF's mission is to stop the degradation of the Earth's natural environment and to build a future in which humans live in harmony with nature, by conserving the world's biological diversity, ensuring that the use of renewable natural resources is sustainable, and promoting the reduction of pollution and wasteful consumption http://www.wwf.or.th to learn more.
About NUS CGIO
The Centre for Governance, Institutions and Organisations (CGIO), established by the National University of Singapore (NUS) Business School in 2010, aims to spearhead relevant and high-impact research on governance and sustainability issues that are pertinent to Asia, including corporate governance and corporate sustainability, governance of family firms, state-linked companies, business groups, and institutions. CGIO also organises events such as public lectures, industry roundtables, and academic conferences on topics related to governance and sustainability. For more information, please visit bschool.nus.edu.sg/cgio.