Driving Sustainable Banking in ASEAN

SUSBA: An interactive tool for banks to assess and benchmark their Environmental, Social, and Governance (ESG) integration performance, and identify key improvement areas to stay competitive, resilient and relevant in a resource-constrained, low-carbon future.

National commitments and regulatory landscape across six ASEAN countries

Indonesia

Climate change and sustainability commitments:

  • Committed to reduce GHG emissions by 26% by 2020 and 29% by 2030 (or 41% with international assistance).
  • The National Medium Term Development Plan (RPJMN) 2015-2019 sets national targets for water security, GHG emissions reduction and forest and marine conservation.
  • The National Energy Policy, issued in 2014, targets a 23% share of renewable energy in primary energy supply by 2025.

Regulatory framework supporting sustainable banking

  • The Code of Good Corporate Governance, published by the National Committee on Governance in 2006, provides guidelines for companies on awareness of environmental and social issues.
  • The Indonesian Law on Limited Liability Company No. 40 of 2007 dictates all listed companies to disclose how they implement their commitment to participate in sustainable economic development in their annual report.
  • The Roadmap for Sustainable Finance, launched by the Indonesian Financial Services Authority (OJK) in December 2014, outlines a medium- and long-term sustainable finance programme.
    • The OJK Regulation on Application of Sustainable Finance (NO.51/POJK.03/2017) mandates financial institutions to develop short- and medium-term sustainable finance action plans.
    • The OJK Regulation on the Issuance and Terms of Green Bond (NO.60/POJK.04/2017) regulates the issuance of and requirements for green bonds.
  • The Guidelines for Sustainable Palm Oil Financing, developed by OJK in collaboration with WWF in 2017, facilitates financial service institutions in incorporating relevant E&S safeguards into their palm oil, clean energy, and other sector policies.

Sustainable Finance industry platform:

  • The Indonesian Sustainable Finance Initiative, launched in 2018, promotes the adoption of sustainable finance practices by strengthening organizational capacity and facilitating dialogue between banks, regulators, investors, and other key stakeholders.

Malaysia

Climate change and sustainability commitments:

  • Committed to reduce GHG emissions intensity of GDP by 35% by 2030 (or 45% with international assistance). This includes achieving a 20% renewable energy capacity mix and 8% savings from energy efficiency by 2025.
  • The 11th Malaysian Plan (11MP) 2016-2020 aims for Malaysia to become an advanced economy through a "resilient, low-carbon, resource-efficient and socially inclusive" route and is also used as a roadmap for achieving the emissions intensity reduction target.
  • New Economic Model (NEM): introduced in 2010, it is an important part of the government's 2020 vision of transforming the country into a high-income economy, with sustainability forming one of the core goals.

Regulatory framework supporting sustainable banking

  • The Green Technology Financing Scheme, launched by Bank Negara Malaysia (BNM) in 2010, with an enhanced scheme approved by the Ministry of Finance in March 2019, incentivizes banks to support activities with a positive environmental impact by offering an interest rate subsidy and guarantees for loans granted to qualifying companies and projects.
  • Bank Negara Malaysia (BNM) became a member of the Network for Greening the Financial System (NGFS) in October 2018.
  • The Sustainability Reporting Guide and Sustainability Toolkits, introduced by Bursa Malaysia in 2015 and updated in February 2018, supports listed issuers in integrating sustainability into their organizations. It includes references to the SDGs and recommendations of the Task Force on Climate-related Financial Disclosure (TCFD).
  • The Malaysian Code on Corporate Governance, revised by Securities Commission Malaysia in 2017, promotes good corporate governance practices for listed firms.
  • The Malaysia Securities Commission introduced a scheme in 2018 for issuers to claim review costs associated with issuing a green sukuk.
  • The BNM's Value-Based Intermediation framework, opened for public consultation in October 2018, aims to improve the contribution of Islamic banks to positive economic, environmental and social outcomes, supported by an implementation guide, an E&S impact assessment framework and a scorecard.

While not a regulatory framework, BNM is a member of the Network for Greening the Financial System (NGFS).

Philippines

Climate change and sustainability commitments:

  • Committed to reduce GHG emissions by 70% by 2030 in comparison to a business-as-usual scenario conditional on "the extent of financial resources, including technology development & transfer, and capacity building, that will be made available to the Philippines".
  • The Philippine Development Plan 2017 - 2022 sets targets for forest cover, water quality, land degradation and disaster resilience.
  • The Philippine National Climate Change Action Plan (PNCCAP), released in 2011, prioritizes the mitigation of key E&S risks such as food and water stress, ecosystem and environmental degradation, and fossil fuel dependency as the strategic direction for 2011 to 2028.
  • The Sustainable Energy Finance (SEF) Programme, launched in 2012, supports private banks through capacity building, technical evaluation and product development to catalyze the financing of energy efficiency and renewable energy projects.

Regulatory framework supporting sustainable banking

  • The Code of Corporate Governance, reviewed by the Securities and Exchange Commission (SEC) in 2016, provides recommendations on ESG disclosure, transparency and shareholder protection.
  • The Corporation Code of the Philippines, revised in 2018 by the SEC, covers some aspects of good corporate governance such as board nomination.
  • The SEC issued the Sustainability Reporting Guidelines for Publicly-Listed Companies (PLCs) in February 2019, to help PLCs assess, manage, and disclose their economic, environmental and social performance. This enables PLCs to monitor their contributions towards international sustainability targets such as the UN SDGs. The guidelines are based on internationally accepted reporting frameworks such as GRI and SASB.
  • In April 2019, Bangko Sentral ng Pilipinas (BSP) announced that it is planning to issue a sustainable finance policy framework, to mainstream ESG integration in the banks' operations.

Singapore

Climate change and sustainability commitments:

  • Committed to reduce GHG emissions intensity by 36% from 2005 levels by 2030.
  • The Sustainable Singapore Blueprint, developed by MEWR and the Ministry of National Development in 2015, aims to develop a leading green economy and create a more liveable and sustainable city.
  • The Climate Action Plan, published by the National Climate Change Secretariat in 2016, outlines how Singapore will reduce GHG emissions and achieve energy efficiency targets.
  • Implemented a carbon tax at a rate of $5 per tonne of CO2 until 2023, with plans to increase the rate to $10-15 by 2030.

Regulatory framework supporting sustainable banking

  • SGX-ST Listing Rules Practice Note 7.6 Sustainability Reporting Guide, introduced by Singapore Exchange (SGX) in 2016 for listed companies as a response to growing shareholders and investors expectations, encourages banks to be stakeholder-driven when developing policies.
  • The Association of Banks in Singapore (ABS) Guidelines on Responsible Financing, released in 2015 and updated in June 2018, define minimum standards around senior management commitment, governance and capacity building for member banks.
  • The Haze Prevention and Fire Risk Assessment toolkit was released in 2017 by ABS to guide banks in the assessment of their palm oil and pulp & paper clients' haze and fire management practices.
  • The Monetary Authority of Singapore (MAS) Green Bonds Scheme was launched in 2017 to offset the additional costs of issuing green bonds (i.e., third-party review).
  • The Code of Corporate Governance of Singapore, revised in August 2018 and with effect from 1 January 2019, put emphasis on the benefits of a well-governed company for a wide range of stakeholders beyond shareholders.

While not a regulatory framework, MAS is a founding member of the Network for Greening the Financial System (NGFS).

Sustainable Finance industry platforms:

  • The Asia Sustainable Finance Initiative, launched in January 2019, is a multi-stakeholder initiative that aims to harness and amplify the power of the financial sector to create resilient, climate-smart, and resource-efficient economies.

Thailand

Climate change and sustainability commitments:

  • Committed to reduce GHG emissions by 20% by 2030, compared to the projected business-as-usual level, or 25% with international assistance.
  • The Climate Change Master Plan (CCMP) 2015-2050 aims to achieve sustainable low carbon growth and climate change resilience by 2050.
  • The Twelfth National Economic and Social Development Plan 2017-2021 released in 2017 aims to preserve and restore natural resources and environmental quality in order to support green growth.
  • The Sufficiency Economy Philosophy (SEP) espouses "moderation, appropriate technology, careful risk management, and flexibility" and mentions green financing as a tool to support the SEP and the SDGs.

Regulatory framework supporting sustainable banking

  • The Stock Exchange Thailand (SET) Principles of Good Corporate Governance for Listed Companies, issued in 2012, recommends that the board should consider environmental and social issues associated with both direct and indirect operations.
  • The Guidelines for Sustainability Reporting, released by SET in 2012, provide further guidance on ESG reporting.
  • The Corporate Governance Code for listed companies, revised in 2017, encourages the board to "comprehensively apply the CG Code to the company’s business in the interest of long-term sustainable value creation".
  • In August 2019, the Thai Bankers' Association released guidelines on sustainable banking, defining the minimum standards for responsible lending practices for all banks based in Thailand.

While not a regulatory framework, Bank Of Thailand is a member of the Network for Greening the Financial System (NGFS).

Vietnam

Climate change and sustainability commitments:

  • Committed to reduce GHG emissions by 8% by 2030, (25% with international support).
  • The National Socio-Economic Development Strategy 2016-2020 sets national targets for sustainable development, environmental protection and natural resource conservation.
  • The National Climate Change Strategy 2011 sets objectives to develop a low-carbon economy, protect the global climate system and promote sustainable development.
  • The Green Growth Action Plan for 2014-2020 prescribes actions to be taken to guide the country towards green growth including active collaboration with the financial sector.

Regulatory framework supporting sustainable banking

  • The Directive 03/CT-NHNN on Promoting Green Credit Growth and Environmental and Social Risks Management in Credit Granting Activities was issued by the State Bank of Vietnam (SBV) in 2015, and serves as sustainable banking regulations for banks operating in Vietnam.
  • The Decision 1552/QD-NHNN on issuance of Action Plan of the banking sector to implement the National Strategy on Green Growth toward 2020, issued by SBV in 2015, details the role of the financial sector in supporting sustainable development in Vietnam.
  • The Decree No. 71/2017/ND-CP, issued by the Government of Vietnam, in 2017, is a set of guidelines on corporate governance for public companies.
  • Sector-specific environmental and social checklists, issued by SBV in 2018, provide specific guidance to banks in managing E&S risks in ten high-risk sectors.
  • In August 2018, SBV issued Decision No.986/QD-TTg on the Development Strategy of Vietnam Banking Sector to 2025, with Orientations to 2030, with the aim to promote sustainable development, integrate green finance into banks' credit processes, and increase the proportion of renewable energy in banks' portfolios.
View assessments for Vietnamese banks Or view ASEAN country averages
Vietnam
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SUSBA: From research to action

View the performance of 35 banks on ESG integration. Use the results to inform decision-makers within governments and financial institutions to drive sustainable banking in ASEAN.
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