Banks may look at sustainable practices when approving loans

SIAU MING EN Today Online 7 Apr 17;

SINGAPORE — The Singapore Institute of International Affairs (SIIA) is looking at developing a set of recommendations for banks and financial institutions to adopt sustainable financing, including getting lenders to conduct more thorough screening of firms and their sustainable practices before issuing loans.

Announcing this at the Singapore Dialogue on Sustainable World Resources held at the St Regis Singapore yesterday, SIIA chairman Simon Tay said the institute will be working with the Monetary Authority of Singapore and the United Nations Environment Inquiry on this initiative.

The think-tank is expected to produce a report with more details later this year.

Speaking to the media on the sidelines of the event, Assoc Prof Tay noted that banks in the region have “traditionally lent purely for commercial reasons”.

“They are not lending maliciously but some of them might be lending with a blind eye, they are not really looking at these issues,” he added.

Some of the recommendations could include better financing companies which are engaged in sustainable practices through green bonds or other incentives.

The Association of Banks in Singapore for instance, has also begun reaching out to banks to help them understand the issue, such as how they can screen companies before issuing loans.

Citing Budget announcements, including the Government’s plan to introduce a carbon tax on power stations and other large direct emitters from 2019, Assoc Prof Tay noted that Singapore is heading in the direction of sustainable financing.

He noted that the serious bout of haze in 2015 had affected Singaporeans as individuals, prompting them to ask whether the items they buy contribute to haze.

“Consumers are important, but we are a very large financial hub. If we can use and leverage that strength, we will have a larger impact, not just in Singapore but across the region,” he added.

In his keynote address at the event, Minister for the Environment and Water Resources Masagos Zulkifli reiterated that sustainability should no longer be an afterthought for companies, as it can directly impact the bottom line.

“With increasing global awareness of the impact of unsustainable farming practices, a lack of oversight over supply chains can result in serious reputational and financial risks for companies,” he said. As the region develops, private sector financing will play an increasingly important role, such as directing private capital to projects that take environmental factors into account, he added.

He also cited Temasek Holdings as an example of investment firms that have moved to anchor sustainability in their investment processes.

Earlier, during a panel discussion, Temasek’s managing director of Enterprise Development and Sustainability Neo Gim Huay was also asked how the company ensures that its investments are not contributing to forest fires in Indonesia.

Ms Neo said that beyond declaring that it would not invest in unsustainable companies, Temasek also wants to play a part in addressing the issue and solving problems.

She added that she had personally visited its Indonesian investment with Cargill and vouched for is sustainable practices, for example.

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