WWF’s 2020 Sustainable Banking Assessment (SUSBA), the fourth such assessment by the organisation, found that 75% of the 38 Asean banks assessed have “made progress” in integrating environmental and social considerations into their financing activities.
Almost 30% of the banks have improved on at least 10% of the assessment criteria from 2019.
Of the 38 banks, eight fulfilled at least half of the 70 criteria. The number is double that of the four banks in 2019.
The assessment is based on a framework covering six aspects of environmental, social and governance (ESG) integration: purpose, policies, processes, people, products and portfolio. It also includes a new section which deep-dives into analysing sector policies.
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Through the assessment, the WWF also found that the banks – which includes five Japanese and South Korean banks each, along with 38 banks in Asean – still have large gaps that leave their portfolios vulnerable to risks due to climate change and nature loss.
In the Asean region, 24% of Asean banks have a climate-related strategy, compared to all five Japanese banks and 60% of banks in Korea having the same.
About 34% of Asean banks recognise deforestation and biodiversity risks, three more banks than in 2019. While all five Japanese banks recognize deforestation risks, none have made similar commitments to eradicating deforestation in their portfolios.
Only 21% of Asean banks and 20% of Korean banks recognise water risks beyond pollution.
On coal-related financing, Shinhan Bank in Korea and all the Japanese banks have policies that prohibit financing of coal-fired power plant projects.
In contrast, 91% of Asean banks continue to do so. Of the Asean banks assessed, Singapore’s DBS, OCBC and UOB are the only ones to have prohibited the financing of new coal-fired power plants. Malaysia’s CIMB has announced its intentions to issue a coal policy by end 2020.
Some 53% of Asean banks are also engaging with regulators on sustainable finance topics – a big leap from the 31% in 2019.
Japanese banks, according to the assessment, tended to score well on climate-related criteria, with all banks being in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations of climate-related governance.
Japanese banks also scored well on the Products pillar, with every bank achieving at least 75% of the criteria.
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Banks in Korea scored well on disclosing how they have incorporated sustainability into their visions and long-term strategies, placing them at a similar level to Asean banks.
However, most had insufficient disclosure on the policies and processes used to manage ESG risk in their financing activities.
WWF’s Senior Vice President of Asia Sustainable Finance, Dr Keith Lee, said, “Besides banks in Asean, this year’s assessment also includes major Japanese and South Korean banks. They play a significant role in financing businesses not just in their home countries but in Southeast Asia as well.”
“Many banks made good progress this year. Maintaining this progress into 2021 will be challenging but crucial as the world grapples with the Covid-19 pandemic. Banks have an important role to play; just as they help businesses recover from the pandemic, they are pivotal to navigating the climate and nature emergencies. This crisis has shown that society is more exposed to nature risk than ever, but with the right corrective actions, we can emerge stronger and more resilient,” he adds.
