About SUSBA

The Sustainable Banking Assessment (SUSBA) tool shows year-on-year changes and highlights progression or regression in banks’ performance on the integration of environmental and social (E&S) considerations in their corporate strategy and decision-making processes.

"I urge all my friends in the banking industry in this region to be part of this ASEAN sustainable growth story and ensure that the activities of their clients fully support the Paris Agreement on climate change and the UN's Sustainable Development Goals. Together, I believe we can create great businesses and prosperous economies that do good for people - and the planet."
Tommy Koh, Ambassador-At-Large, Ministry of Foreign Affairs, Singapore

Objectives of SUSBA

Objectives of SUSBA
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  • Highlight the potential for the financial sector to drive sustainable development in ASEAN and beyond.
  • Provide a decision-useful assessment framework that incorporates environmental and social issues most relevant to the ASEAN region.
  • Help stakeholders assess banks’ management of climate risk amid strong global support for the Task Force on Climate-Related Financial Disclosures (TCFD) framework, UNEPFI Principles for Responsible Banking (PRB), and other initiatives.
  • Help shareholders, potential investors, regulators and civil society representatives to track banks’ progress and performance on ESG integration by displaying the evolution of results year-on-year.
  • Present the results in an online interactive platform that allows users to compare selected banks and indicators based on their preferences.

Methodology: Environmental & Social

Sectors & Issues methodology

Assessment framework

The SUSBA tool assesses the public disclosures of 38 listed banks across six ASEAN countries - Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The assessment framework comprises six pillars and 11 indicators, that signify what WWF considers to be robust ESG integration. The assessment is performed against 70 sub-indicators, with binary "yes/no" answers.

We developed this framework with reference to:

a) Existing international frameworks, standards and initiatives, including:

  • GRI Sustainability Reporting Guidelines,
  • International Integrated Reporting Council (IIRC)'s International Integrated Reporting Framework
  • TCFD recommendations
  • Sustainability Accounting Standards Board (SASB)

b) Relevant national principles and guidelines on sustainability reporting.

c) Specific environmental and social issues most relevant to Southeast Asia.

d) Deep science-based insights rooted in our global network of sustainability experts.

To provide a more comprehensive data set against which ASEAN banks can benchmark themselves, the 2019 update includes assessments of select international banks that are active in the ASEAN loan market (based on league table data). Although SUSBA remains an ASEAN-focussed tool, ASEAN banks may find it useful to compare themselves against international banks that began their ESG integration journey earlier.

To highlight the progress that banks have made on ESG integration, the assessment results also display improvements or regressions (indicated in green and red, respectively). To view the detailed assessment results and benefit from the tool's full functionalities, users should request access and log in.

Methodology pillars

Scope

The assessment of ESG integration focuses only on the banks' indirect footprint, i.e. its exposure to ESG risks and impacts through client relationships, as opposed to the bank's direct footprint (e.g. building energy consumption, paper consumption, and staff travel). There is a broad consensus among various stakeholders (investors, regulators, civil society) that while the management of direct impacts is important, indirect risks and impacts are far more significant, and should form the backbone of any bank's sustainability strategy.

The assessment focuses on the banks' corporate/wholesale activities. Retail banking, private banking, and asset management divisions are excluded.

Scope covered
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Information used

Bank information reviewed for the assessment included only publicly available, English-language disclosures in the form of fiscal year 2019 annual reports, sustainability reports or corporate social responsibility reports, as well as information posted on corporate websites such as company policies, statements, investor presentations and press releases. These public disclosures represent what is available to international investors and stakeholders looking to develop an understanding of how banks are managing climate and ESG risks and opportunities so as to contribute to sustainable development. The banks were not interviewed and have not verified the information contained in this report.

Information used
© Shutterstock / Leung Cho Pan / WWF

The six pillars of ESG integration

The first step is for banks to develop an overarching sustainability strategy and recognize their role in contributing to a more sustainable economy. Banks should then develop specific policies to guide the integration of ESG considerations into internal processes and engagement with clients. For this to be effective, people need to be trained and have clear roles and responsibilities, with senior-level oversight and accountability. Beyond E&S risk management, banks should capitalize on opportunities to develop innovative products and services that support their clients in improving sustainability performance. In order to manage enterprise-level risks and opportunities and ensure that a bank's business model is aligned with international sustainable development objectives, it is crucial that ESG risks and opportunities are assessed at the portfolio level.

Purpose

Purpose
  1. Sustainability strategy and stakeholder engagement
  2. Participation in sustainable finance initiatives and policy advocacy with regulators

Policies

Policies
  1. Public statements on specific ESG issues
  2. Public statements on specific sectors

Processes

Processes
  1. Assessing ESG risks in client and transaction approvals
  2. Client monitoring and engagement

People

People
  1. Responsibilities for ESG
  2. Staff E&S training and performance evaluation

Products

Products
  1. ESG integration in products and services

Portfolio

Portfolio
  1. ESG risk assessment and mitigation at portfolio level
  2. Disclosure of ESG risk exposure and targets

Methodology: Sectors & Issues

E&S methodology

Assessment framework

The Sectors & Issues framework is a new feature of SUSBA for 2020. The purpose of this framework is to guide banks on which commitments and disclosures they need to be making in order to address issues in key sectors for environmental and social factors. These sectors can include palm oil, energy, seafood and mining. Issues include climate change, deforestation, clean water, floods and drought.

Banks will typically start their journey on ESG integration with the SUSBA E&S pillars, before adding commitments and expectations on sectors and issues, but some banks will also do this concurrently.

The framework comprises two pillars. The first pillar assesses the bank’s public commitments and understanding of the E&S issues at hand. The second pillar is what the bank expects of clients operating in that sector. The number of indicators will vary by sector and issue.

Banks can score 0, 0.5 or 1 on each sub-indicator. A score of 0.5 is given for incomplete or less robust performance.

We developed this framework with reference to:

a) Existing international frameworks, standards and initiatives, including:

  • GRI Sustainability Reporting Guidelines
  • International Integrated Reporting Council (IIRC)'s International Integrated Reporting Framework
  • TCFD recommendations
  • Sustainability Accounting Standards Board (SASB)

b) Relevant national principles and guidelines on sustainability reporting.

c) Specific environmental and social issues most relevant to Southeast Asia.

d) Deep science-based insights rooted in our global network of sustainability experts.

To view the detailed assessment results and benefit from the tool's full functionalities, users should request access and log in.

Scope

The assessment of Sectors & Issues is consistent with SUSBA by focusing only on the banks' indirect footprint, i.e. its exposure to E&S risks and impacts through client relationships, as opposed to the bank's direct footprint (e.g. building energy consumption, paper consumption, and staff travel). There is a broad consensus among various stakeholders (investors, regulators, civil society) that while the management of direct impacts is important, indirect risks and impacts are far more significant, and should form the backbone of any bank's sustainability strategy.

The assessment focuses on the banks' corporate/wholesale activities. Retail banking, private banking, and asset management divisions are excluded.

Scope covered
© Shutterstock / pryzmat / WWF

Information used

For consistency, the assessment only takes into account information that is disclosed publicly in English. This can take the form of annual reports or sustainability/corporate social responsibility reports, covering fiscal year 2019 and released before 31 July 2020, as well as information posted on corporate websites such as company policies, statements, investor presentations and press releases (accessible as of 31 July 2020). These public disclosures represent what is available to international investors and stakeholders looking to develop an understanding of how banks are managing E&S factors in specific sectors or for certain issues. Banks may reach out proactively to inform WWF about updates to banks’ disclosures. WWF will consider those and make necessary revisions, such that the assessments reflect their most updated state.

The information used was derived from a project funded by the International Climate Initiative (IKI).

Information used
© Shutterstock / Leung Cho Pan / WWF

Sector and issue-specific E&S integration

We normally expect banks to start their journey to becoming more sustainable with a general ESG strategy covering the six pillars of ESG integration. After putting in place processes and policies on ESG issues, a bank will often complement this with commitments and policies that pertain specifically to certain key sectors or issues. This begins with an awareness of the E&S issues at hand and committing to solving these issues publicly. With the aid of sector specialists situated in an E&S risk team or sustainability team, banks should increase the sophistication of how they expect their clients to operate. Specific expectations will vary by sector but should touch on all relevant points within the value chain.

Bank Commitments

1. Sector approach

2. Disclosure of impact

3. Monitoring of clients

Board

Client Expectations

Client expectations will vary according to the specific characteristics of the sector or issue, and their connection to key environmental and social factors. Some expectations may also be more relevant to specific regions, based on E&S physical and transition risk factors.

Shareholders and stakeholders

Assessed banks

A range of assessments for international banks active in the ASEAN region are available for use in the assessment.

To learn more, explore assessments for overall ESG integration or Sectors & Issues, or visit the Southeast Asia region page.

About WWF

WWF montage
© WWF

WWF has worked with the financial sector (banks, investors and regulators) for more than a decade, with the objective of accelerating the integration of ESG risks and opportunities into mainstream finance, so as to redirect financial flows to support the Paris Agreement and the SDGs. Our approach to sustainable finance leverages:

  • Our conservation experience on the ground across WWF’s global practices.
  • Our partnerships with companies on key issues such as climate, energy, food and water to drive sustainability.
  • Our participation in cutting-edge sustainable finance initiatives (e.g. Science Based Targets initiative and the European Commission’s Technical Expert Group on Sustainable Finance).

This has allowed us to strengthen lending and investment criteria for key industry sectors, provide insights and data on environmental and social risks, fulfil critical research gaps, help unlock innovations in sustainable finance products and convene key stakeholders to progress the sustainable finance agenda.

Header image © Shutterstock / Kanuman / WWF