Banks on the path of responsible financing
When banks loan companies money without considering environmental, social and governance factors, they run the risk of supporting companies that engage in unsustainable practices (“DBS, OCBC financed Indonesian palm oil firms engaged in unsustainable practices: Report”; June 2, Channel NewsAsia).
Unsustainable practices in the palm oil and paper industries are a cause of the haze that has affected Singapore. Non-governmental organisation People’s Movement to Stop Haze therefore applauds DBS, OCBC and UOB for outlining in their annual reports how they will be more discerning going forward.
Their financing policies embed environmental, social and governance factors into decisions about whom they lend to and the conditions included.
DBS has gone further by setting a sector-specific standard for palm oil: New borrowers should “additionally demonstrate alignment with no deforestation, no peat and no exploitation policies”.
Even if there is only one loan, regardless of the size, to a company in a high-risk sector, there is a right way to do it.
No deforestation, peat and exploitation (NDPE) is increasingly recognised as the gold standard in the agriculture and forestry industries.
It reduces the risk of fire and haze, as deforestation and peat drainage create dry and flammable landscapes, while exploitation often leads to land conflict, with fire used as a weapon.
Our banks play a role in promoting responsible practices globally and shrinking the pool of funds for irresponsible companies’ destructive ways.
To keep the momentum going, firstly we urge OCBC and UOB to develop and adopt a palm oil policy with NDPE. This would reinforce their commitment to a haze-free Singapore and South-east Asia.
Secondly, all three local banks should publicly disclose sector-specific policies for the high-risk industries mentioned in the Association of Banks in Singapore guidelines: Agriculture, chemicals, defence, energy, forestry, infrastructure, mining and metals and waste management.
For decades, our banks have served Singaporeans well as a safe place for deposits. As we face environmental and social threats, we hope that our banks continue to serve us well by lending money for a safer world.