PM.Haze welcomes the adoption of Responsible financing standards/policies by DBS, OCBC and UOB. These policies include environmental, social and governance factors (ESG) in decision-making. Investment and lending decisions made without considering ESG criteria has adverse implications for people, the environment and economy. The trans boundary haze that has been plaguing the region for decades is an example of this.
This issue was in the news again in early June when Channel News Asia (CNA) featured a report by NGO’s Rainforest Foundation, Aidenvironment and Fair Finance Guide. According to the report DBS and OCBC financed Indonesian palm oil firms engaged in unsustainable practices. The unsustainable production of palm oil and paper has been identified as a major cause of haze in Southeast Asia.
Globally, the momentum to include ESG criteria got stronger because of issues such as: Environmental – Climate change including extreme weather events and pollution, Social -human rights abuses including child labour and exploitation workers and Governance- the financial crisis of 2008 which is attributed partly to poor governance.
In Singapore, the urgency for considering ESG factors increased during the haze crisis of 2015. DBS, OCBC and UOB are major financiers of the palm oil industry in the region. So they have a key role in influencing practices on the ground such as clearing of land by fire and cultivation on peat. The public outcry after the haze led to a call for action from all stakeholders. The Association of Banks in Singapore came out with guidelines in October 2015 for its members to include responsible financing standards in their operations.
Singaporean banks have started this process by including ESG criteria in their decision-making. DBS in its response CNA (on the report mentioned earlier) has acknowledged that it can play a bigger role in sustainable development of the palm oil sector. DBS has updated its approach to this sector. OCBC has responded that it assesses borrowers based on its internal ESG requirements.
We would like to congratulate DBS for outlining its approach to the palm oil sector and taking the lead in committing to a No Deforestation, No Peat, No Exploitation policy (NDPE). This is in line with global best practices in the palm oil industry. We would like to urge the banks to keep the momentum going and take leadership of sustainable financing in the region. We urge:
- OCBB and UOB to develop and adopt a palm oil policy that embeds NDPE. This will reinforce their commitment to a haze free Singapore/ASEAN.
- All three banks to publicly disclose the sector specific policies for the eight high-risk industries mentioned in the ABS guidelines especially agriculture, energy and forestry. These have a significant impact on the most important environmental challenges of our times – climate change and over exploitation of natural resources.
Singaporean banks have served Singaporeans well for the past decades. We hope they will continue to serve us in meeting the growing environmental challenges of our time.