OCBC Bank adopts the Equator Principles
Singapore, 1 December 2020 – OCBC Bank announced today that it has adopted the Equator Principles, an internationally-recognised risk management framework adopted by financial institutions worldwide which will guide how the Bank determines, assesses and manages environmental and social (E&S) risks in projects. This move is part of the Bank’s ongoing push towards responsible financing and builds on its previous commitments to sustainability.
Earlier this year, the Bank announced an ambitious new target of S$25 billion by 2025 for its sustainable finance portfolio after surpassing its initial target of S$10 billion in the first quarter of 2020 – two years ahead of schedule. Notable deals include an A$25 million green loan to ComfortDelGro to finance a hybrid bus fleet in Australia, a S$1.95 billion green club loan to M+S Pte. Ltd. for Marina One, and a sustainability-linked trade facility to support the trade and shipment of 50,000 metric tonnes of sustainably sourced sugar, valued at almost US$16 million.
The Equator Principles (EPs) is recognised internationally as the “gold standard” for E&S Risk Management for infrastructure projects. It establishes a common standard for determining, assessing and managing environmental and social risks in large-scale development projects. The EPs is based on the International Finance Corporation (IFC) Performance Standards published by the World Bank Group and covers a majority of the project finance transactions originating from emerging markets, providing a minimum standard for due diligence and monitoring to support responsible risk decision-making.
OCBC Bank’s voluntary adoption of the EPs is an extension of the Responsible Financing framework which the Bank has put in place since 2017. The existing framework on responsible financing spells out a range of policies and practices to ensure that the financial services provided by the Bank do not adversely impact people, communities or the environment.
As a signatory of the Equator Principles, OCBC Bank will further strengthen its Environmental, Social and Governance (ESG) related disclosure and reporting by disclosing information related to large-scale projects the Bank has financed globally. This will ensure that strict environmental and social standards are applied in line with the international best practices including the IFC Performance Standards during the project development and construction process, including follow-up monitoring.
Mr Vincent Choo, Group Chief Risk Officer, OCBC Bank said: “As we are committed to taking a long-term view on how we create and sustain value for society and the environment, we are constantly improving our approach to responsible and sustainable financing. The adoption of the Equator Principles is another step we are taking towards further strengthening our Responsible Financing policy. We have aligned our efforts internally with the objectives of the Equator Principles – working responsibly with our clients through our business units, across the bank to further strengthen our position as a Sustainable Bank in the region.”
Mr Choo added: “Given that infrastructure development is a key economic driver in emerging Asia to sustain growth in the region, the demand in Asian markets to finance large projects such as infrastructure projects to expand transport links and enhance access to basic services such as energy and water has increased significantly. Because of their size, these projects often have a significant effect on the environment and neighbouring communities.
“Through our financing activities within Asia, we are key partners in the development in the region. It is therefore our responsibility to ensure that the projects we finance are developed in a socially-responsible manner and reflect sound environmental management practice.”
Key milestones in OCBC’s sustainability journey
In 2019, OCBC Bank was the first bank in Southeast Asia to announce that it will stop funding new coal power plants globally. As the Bank stops its financing of coal-fired power plants, it continues to ramp up efforts to increase the percentage of renewable energy projects in its portfolio to support the world’s transition to a low-carbon economy.
In January 2019, the Bank established its Global Centre of Excellence in Responsible and Sustainable Financing (Sustainable Finance Group) to ensure responsible and sustainable financing both in lending practices and capital market activities. Transactions that are deemed to carry significant ESG risks will be additionally routed to the Sustainable Finance Group for its evaluation. In its evaluation process, looking beyond profitability, the Sustainable Finance Group takes a risk-based approach towards managing ESG risk, incorporating them into the overall Bank’s credit and risk evaluation for its lending practices and capital markets activities.
The Sustainable Finance Group also plays a business development role in promoting investments in environmentally-sound projects and industries, so the Bank can partner clients who are embarking on their own sustainability journeys, and actively support them through the development of a comprehensive and innovative range of sustainable financing solutions to take action on climate change and to promote sustainable development.
With this holistic approach, OCBC Bank hopes to spur the development of a comprehensive and innovative range of climate change and sustainability-related solutions to achieve its target to build a sustainable finance portfolio of S$25 billion by 2025.