Banks play key role in environmental protection: WWF

Linette Lim Channel NewsAsia 10 Sep 14;

SINGAPORE: The World Wide Fund for Nature (WWF) believes that banks can play an important role in the global push towards environmental protection. It said that financial institutions and investors hold the key to ensuring that fund flows are redirected to more sustainable causes.

Singapore experienced its worst haze crisis in history at roughly this time last year. The haze is caused by farmers in Indonesia, who use slash-and-burn methods to clear their land for the next planting season. To deter farmers from using slash-and-burn methods to clear land, the Indonesian government has resorted to naming and shaming the palm oil companies which are responsible.

However, WWF believes that more can be done and said that part of the solution may lie in the banks that finance those companies. Ms Jeanne Stampe, the Asia Finance and Commodities Specialist at WWF International, said: "There is increasing demand for traceability and for sustainability standards on the part of the customers who are buying from the palm oil companies.

"So if you are a bank lending to a palm oil company, you would want to see that palm oil company has certain sustainability standards in order to improve its market access, which affects the topline, and also to avoid any fines which would then hit the profits."

CHANGE MUST COME FROM WITHIN INDUSTRIES

On the back of a report launched on environmental, social and governance issues for banks, WWF held a workshop in Singapore for lenders on Tuesday (Sep 9), which said that change must come from within the various industries.

Mr Mark Devadason, global head of sustainability at Standard Chartered Bank, said: "Quite often, industry has a negative connotation. Some industries raise eyebrows - whether it is palm oil or forestry. But business needs to go on, and I think the best way to support and drive positive change is from within. If we just walk away, businesses do not necessarily change."

Mr Ben Ridley, head of sustainability affairs for Asia Pacific at Credit Suisse, said: "We have global policies around sustainability. We also have sustainability policies for certain industries - for mining, for oil and gas, for forestry, agribusiness. What we are doing through those policies is that we are looking at a number of touch points with our clients, in terms of their commitment, their capacity, the systems and the procedures that they have in place to manage these issues."

GREATER PRESSURE ON FIRMS, BANKS

In the last five years, there has been greater pressure on companies that do not operate in a sustainable manner and greater scrutiny on the lending practices of banks.

Ms Monica Hira, the Sustainability and Climate Change Leader at PwC Singapore, said: "We have had situations where large banks recently, over the past one year, have been in the public eye - not necessarily for the right reasons but for their financing of projects around the Great Barrier Reef. Closer to home, there is talk about lending to companies that are involved in the destruction of the rainforests."

But it is not just about bad publicity - there are business considerations as well. Banks could get hit hard on their loan books, for example, if they extend too much credit to coal mining firms at a time when there is pressure on them to cut down on carbon emissions.

According to PwC's climate change analysts, global economies need to cut their energy-related carbon emissions for every dollar of GDP by 6.2 per cent every year from now to 2100 - that is more than five times the current rate. The reduction target is an estimate based on a global warming limit of two degrees. Two degrees of warming is the limit scientists agree is needed to ensuring the serious risks of runaway climate change impacts are avoided.

- CNA/ac