Taking Deforestation out of Banks Portfolios in Emerging Markets
As of: September 2021
In Southeast Asia, large-scale logging is primarily the result of unsustainable production practices in the agriculture and forestry sectors. Alongside producers, purchasers, consumers and government, the finance sector is a key actor in steering the sustainable production of goods as well as ecologically sound infrastructure expansion. This project supports the inclusion of environmental and social standards into credit decisions made by financial institutions in target countries. This includes a set of criteria for deforestation-free production. Together with the partner institutions, sector-specific guidelines are being prepared, new, ‘green’ financial products developed and improvements made to existing products. Consulting and training also ensures that financial market regulators will adopt and integrate environmental and social standards.
State of implementation/results
- On September 07, 2020, the updated regional WWF bank assessment of the largest national banks in ASEAN was published. New this year is the assessment of sector-specific guidelines of ASEAN banks, which was initiated with the guidelines for lending to the palm oil sector.
- In Dec 2019, WWF published the report "Sustainable Banking Regulations in ASEAN - Raising the Bar" in which WWF assesses the sustainable banking guidelines of five countries (Indonesia, Malaysia, Singapore, Thailand, Viet Nam).
- With support of the project, the study "Unlocking Smallholder Finance for Sustainable Agriculture" was published in March 2021
- The WWF team is currently working with the OJK (Financial Market Authority) on a new guideline for the land-based sector. The guidelines contain recommendations for protective measures against deforestation, such as the evaluation and protection of areas with high conservation value (HCV) and areas with high carbon stock (HCS).
- In the context of the bank assessment, BCA and BRI made the greatest progress among Indonesian banks, with an improvement of 16 points and correspondingly 15 points (out of a total of 70).
- WWF-Indonesia was invited to provide inputs for the development for the monitoring tools for financial institutions of OJK (Financial Supervisory Authority) in order to assess the effectiveness of sustainable finance regulation and its implementation
- OJK unveiled its Sustainable Finance Roadmap Phase II in January 2021, which WWF-Indonesia helped develop.
- In total, the Indonesia Sustainable Finance Initiative (IKBI) now includes 14 banks representing 67% of national banking assets, 1 state-owned infrastructure finance company, and the WWF-Indonesia
- WWF-Malaysia was officially included as an "Invited Expert" and "Observer" in four sub-committees of the Joint Committee on Climate Change (JC3) to advance and coordinate the financial industry's joint response to climate risks.
- Two more Malaysian banks are now part of the bank assessment: Bank Islam and Bank Rakyat. In general, all banks in Malaysia are showing signs of improvement regarding ESG integration.
- As part of the Bank Negara Malaysia (BNM, central bank) public consultation, WWF submitted feedback and provided substantive support for BNM's discussion paper on climate change and principles-based taxonomy.
- The team in Myanmar is expanding its partnerships with other NGOs and DFIs, active in sustainable finance.
- One of the banks supported by WWF in its ESG integration has published its first sustainability report.
- Between March and August 2020, WWF implemented training with three banks and 20 bank employees on ESG integration and the assessment of climate and environmental risks in banking transactions and loan portfolios.
- Overall, the Philippine banks increased their scores on the 70 assessment indicators. Improvements are evident in the areas of disclosure, sustainability strategies and stakeholder engagement on sustainability issues.
- In July 2020, the BSP (Bangko Sentral ng Pilipinas, central bank) announced its new sustainable central banking program and its upcoming membership in the NGFS at the WWF-BAP CEO Sustainable Finance Dialogue Forum
- In June 2020, WWF organized a virtual bilateral training on environmental and social risk management for high-risk sectors, and an introduction to the Science-Based Targets initiative (SBTi).
- In connection with the bank assessment, a total of five Thai banks have shown progress over the last year. Two banks meet more than 50% of the criteria.
- A feasibility study for the commercial component of the FLR 349 agroecology fund was completed in February 2021. To this end, the project team worked with the WWF-IKI Sustainable Consumption and Production (SCP) project team on FLR349 with the goal of establishing an investable project in the target landscape (northern Thailand).