HCM City (VNS/VNA) - A new World Wild Fund forNature (WWF) report finds that ASEAN’s biggest banks are increasingly aware ofthe impact their businesses have on the environment and society, but are slowto act on the huge potential they hold in addressing climate change andfinancing sustainable food, energy and infrastructure systems in the region.

The report, published in collaboration with the NationalUniversity of Singapore (NUS) Business School’s Centre for Governance,Institutions and Organisations, found that ASEAN banks were not disclosing howthey managed climate risks in line with the recommendations of the Taskforcefor Climate-related Financial Disclosures (TCFD).

The region is particularly vulnerable to climate change,which exacerbates food and water insecurity. By not considering these issues,banks stand to miss out on ‘game changing’ opportunities for the region’ssustainable development and may face unmitigated climate risks in their ownbalance sheets, according to the report.

Of the 34 banks assessed in six Southeast nations, includingVietnam, only four disclosed that senior managers have oversight of climatechange risks and opportunities, a key recommendation of the TCFD.

Meanwhile, none of the banks disclosed whether they hadreviewed their portfolio exposure to climate risks. They had also not disclosedtheir portfolio alignment with the Paris Climate Change Agreement orSustainable Development Goals (SDGs).

Although some progress on Environment – Society – Governance(ESG) integration has been made, particularly on the part of Singaporean banksand a few Malaysian and Thai banks, disclosure of specific ESG requirements ofbanks across ASEAN remains limited.

Nineteen banks disclosed they have a standardised frameworkfor ESG risk assessment, but only seven disclosed that they have specificpolicies for high ESG risk sectors.

Even then, disclosure of the policies themselves is limited,with just three banks disclosing one or two of their key policies.

Regarding specific environmental and social risks, only fivebanks in ASEAN recognised deforestation risks - a key contributor to climatechange - in their clients’ activities and only two recognised water risks.Given these are key risks for the food and agriculture sector highlighted bythe TCFD, the implications for regional food and water security are worrying.

Vietnamese banks have shown slight progress, with more banksunderstanding that their impact lies in their portfolios rather than their owndirect operations.

However, they have not disclosed ESG policies and processes,indicating that disclosure is not yet a mainstream practice.

The report finds that ASEAN banks are capitalising onopportunities in response to climate change and the need for sustainabledevelopment with 22 banks disclosing they have developed green financialproducts such as green bonds and sustainability-linked loans. 

However, these niche products will not be sufficient on theirown for the huge investments required to meet the Paris Agreement and the SDGsby 2030. 

In order to properly capitalise on this opportunity, banksmust set science-based targets to align their portfolios to a resource- andcarbon-constrained world.

The report finds that banks in ASEAN have not yet done this,and may be missing out on opportunities while continuing to be vulnerable tothe impending transition and physical risks of climate change.

If the ASEAN region is to experience resilient andsustainable development, banks must accelerate the rate at which they fullyintegrate ESG, including climate, deforestation and water risks, into corebusiness strategies.

Banks play a crucial role in financing the transition tosustainable food, energy and transport systems in ASEAN and must be part of thesolution.

Responsible investors, as stewards of capital, need to ensurethat their portfolio banks are making timely progress on this, and engageactively with them to support the transition.-VNS/VNA