Building a sustainable future
Why this is material to us
The growing threat of climate change and the urgent need for sustainable development poses both business risks and opportunities for the banking industry. It is imperative that we manage the evolving Environmental, Social and Governance (ESG) risks impacting our financing activities. We also have an opportunity to develop new solutions that can finance the transition to a low carbon economy and a more sustainable future.
Our aspiration is to be the leading bank for responsible and sustainable finance in Asia. Central to this aspiration is our longstanding commitment to taking a long-term view on how we create and sustain value for our shareholders, for our clients and for society. This commitment informs our approach to responsible and sustainable financing.
Our responsible financing approach
Managing risks and ensuring that we are lending responsibly have always been key tenets of our approach at OCBC.
Over the years, as the disruptive forces impacting business have evolved, so has our approach to responsible financing, which we continue to strengthen.
Our Responsible Financing approach integrates environmental, social and governance (ESG) considerations into our credit and risk evaluation process for our lending practices and capital market activities.
Specifically, we will not engage in or knowingly finance any activity where there is clear evidence of immitigable adverse impact to the environment, people or communities. At a minimum, we expect our customers to meet all local ESG-related laws and regulations. Beyond that, we seek to positively influence our customers' behaviour by engaging them in further adopting appropriate sustainable practices to meet higher ESG industry expectations over time.
Our ESG risk assessment process
Implemented in 2017, our ESG risk assessment process ensures that we integrate the management of ESG risks into our credit and risk evaluation process.
All applicable new and existing corporate, commercial and institutional client transactions are subjected to our ESG risk assessment process.
We take a risk-based approach towards managing ESG risk where transactions that carry high ESG risks are subject to enhanced evaluation and approval requirements.
Exclusion list and sector-specific policies
Our exclusion list
Our exclusion list lays out the activities we will not finance. Some of these are sector-specific while others are cross-cutting.
Our sector-specific prohibitions include:
- Energy: We will not provide new financing for coal-fired power plants.
- Mining and metals: We will not provide new financing to thermal coal mines.
- Defence: We will not provide financing for the production or trade in controversial weapons and munitions for offensive warfare (e.g. nuclear, biological and chemical weapons, anti-personnel mines and cluster munitions).
We also prohibit the financing of:
- The production or activities involving harmful or exploitative forms of forced labour or harmful child labour.
- Projects located in or have significant impact on United Nations Educational, Scientific and Cultural Organisation (UNESCO) World Heritage Sites and Wetlands of International Importance designated under the Ramsar Conventions well as the trade in wildlife or products under Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), among others.
- Production or trade in wildlife including products regulated under the Convention of International Trade in Endangered Species of Wild Fauna and Flora (CITES) and United for Wildlife Financial Taskforce.
Our sector-specific policies
Our sector-specific policies outline our requirements and expectations of clients in sectors with high risk of potential environmental and social impacts.
We continue to evolve our framework by developing new policies or revising existing ones in response to a dynamic external environment.
In 2019, we developed three additional sector-specific policies covering chemicals, infrastructure and waste management. Our sector-specific policies now cover all the industry sectors identified as ‘high risk’ by the Association of Banks in Singapore (ABS) Responsible Financing Guidelines.
For example, we require our borrowers to have policies or procedures against deforestation and to preserve or enhance identified high conservation value areas. The requirements that we have set out under these policies reference IFC Industry Sector Guidelines, as well as relevant standards and conventions from organisations such as the Roundtable Sustainable Palm Oil (RSPO), International Petroleum Industry Environmental Conservation Association (IPIECA), Equator Principles Association and others. In addition, we have referenced ABS Haze Prevention and Fire Risk guidelines, which set out requirements for borrowers including not performing open burning, adherence to local regulations regarding the use of peat and others.
OCBC sector-specific policies:
- Agriculture & Forestry
- Metals and Mining
- Waste Management
ESG resources and training
We have dedicated resources that focus on the management of ESG risks and the effective application of our ESG policies.
We established a taskforce in 2016 to spearhead the further development and implementation of our Responsible Financing policies. This taskforce, comprising representatives from business units and risk functions across the OCBC Group, meets regularly and shares ESG developments and business implications. We currently have seven dedicated ESG specialists which have been appointed to cover both business operations and risk management.
Our Sustainability Council, which is made up of our Group CEO and senior management, identifies, manages and monitors material ESG matters including climate change risks and opportunities. It is also responsible for the development of OCBC's sustainability framework and is updated on ESG developments on a regular basis. On an individual and collective basis, the Council members actively participate in sessions and workshops conducted by non-governmental organisations (NGOs) and regulators on Responsible Financing and other ESG considerations.
Our relationship managers and credit approving officers are trained periodically in the area of Responsible Financing to strengthen their capabilities in assessing ESG issues and risks, and they are updated on developments in OCBC Bank's sectorial policies.
Engagement with stakeholders
We regularly engage our key stakeholder groups, as this allows us to deepen our understanding of their concerns.
As part of our ongoing dialogue with our customers, communities, NGOs and regulators, we share our progress on Responsible Financing and exchange views on global sustainable developments. In addition, we participate actively and contribute our feedback at workshops organised by policymakers, think tanks and industry associations. We continue to engage NGOs that share our view that sustainability is an ongoing journey for companies.
Signatory to the Equator Principles
OCBC adopted the Equator Principles as an initiative for responsible financing. Equator Principles is a risk management framework adopted voluntarily by financial institutions to determine, assess, and manage the environmental and social risks associated with financing of large-scale projects such as infrastructure projects to expand transport links and enhance access to basic services such as energy and water.
The Equator Principles Association Official Website
Signatory to United for Wildlife Financial Taskforce
OCBC is a member of the United for Wildlife Financial Taskforce, a leading global effort to combat illegal wildlife trade. We recognise that the illegal wildlife trade — among the five most lucrative global crimes — has a devastating impact on the dwindling populations of endangered wildlife left in the world. We are committed to ensuring that the Bank does not facilitate or tolerate financial flows derived from the illegal wildlife trade and the corruption associated with it, such as the sale of illegal wildlife products.
Our sustainable financing approach
As a bank, OCBC Bank aims to partner with like-minded clients that contribute to sustainable development in society, by offering bespoke and credible sustainable financing solutions.
In particular, we understand the important role banks need to play to support the transition to a low carbon economy. The Bank has seen a significant increase in the demand for sustainable financing in recent years due to better awareness and heightened efforts to combat climate change.
Led by our dedicated Sustainable Finance Team, OCBC Bank completed more than 20 green loans and sustainability-linked loans in 2019 and has been ranked number 1 Mandated Lead Arranger for green financing league tables in the region. In June 2020, OCBC Bank has set an ambitious new target of S$25 billion by 2025 for its sustainable finance portfolio, having surpassed its original S$10 billion target in the first quarter of 2020 – two years ahead of its 2022 schedule.
Looking ahead, we expect more diversification in industries and countries as our clients embark on their sustainability journey. As the concept of sustainable financing evolves, OCBC Bank will continue to develop a comprehensive and innovative range of solutions targeted to meet the changing needs and opportunities in the markets where our customers are active in.
OCBC SME Sustainable Finance Framework
In 2020, we launched the OCBC SME Sustainable Finance Framework. The aim of the framework is to make it simpler for small and medium-sized enterprises (SMEs) to access sustainable financing of up to S$20 million.
The framework is applicable to SMEs that are involved in sustainable activities across eight Green Project Categories eligible under the Green Loan Principles developed by the Loan Market Association. For more details refer to OCBC SME Sustainable Financing page.
Notable Sustainable Financing Transactions
- OCBC Bank as a co-lender to finance the acquisition of Greater Changhua 1 Offshore Wind Farm in Taiwan
- Mapletree Industrial Trust secures inaugural S$300 million sustainability-linked facility
- OCBC Bank partners Tong Eng Group on Singapore’s first SORA-based green loan
- OCBC Bank provides first property green loan in South Korea to M&G Real Estate
- Ascendas Reit prices maiden green bond with OCBC as sole lead manager, bookrunner and green finance advisor
- Swire Properties secures HK$1 billion green loan from OCBC Bank
- M+S secures S$1.95 billion green loan for award-winning Marina One
- World's first sustainable sugar supply chain finance offered by OCBC Bank
- Keppel Infrastructure Trust and Keppel Energy secure Singapore’s first sustainability linked loan in the energy sector
- Mapletree Investments secures EUR 200 million sustainability-linked loan from OCBC Bank
- Shwe Taung Group partners with OCBC Bank for Myanmar's first green loan
- Hang Lung strengthens its commitment to sustainability with inaugural green loan from OCBC Bank
- ComfortDelGro becomes first land transport company to adopt A$25 million green loan from OCBC Bank
- Capital Mall Trust secures first S$200 million green loan to finance BCA Green Mark certified properties
- Taiwan’s Formosa 2 offshore wind farm completes NT$62.4 billion project financing with OCBC Bank as a co-lender
Why this is material to us
Sustainable investing and sustainability-linked products have been steadily gaining momentum in recent years. There is growing evidence that companies with strong environmental, social and governance (ESG) practices are more resilient and profitable over the long term. At the same time, there is greater awareness and activism on global sustainability issues that are driving interest in sustainable investment opportunities from our customers.
We believe that aligning the financial markets with sustainable development is vital for a prosperous society. As a trusted partner and advisor, we seek to provide products and services that help our customers achieve not only their financial goals, but also their aspirations to contribute to a more sustainable world.
Our ESG product offerings cater to two different customer segments, high-net-worth clients managed by Bank of Singapore, a wholly owned subsidiary of OCBC Bank, and retail clients managed by OCBC’s Consumer Financial Services (CFS) division.
Bank of Singapore’s approach to sustainability-themed products and investing is focused on three key areas:
- Education: Equipping employees with the latest industry trends and product knowledge in order to provide client-centric advice on ESG offerings.
- Thought leadership: Publishing research and insights to help our clients better understand the ESG landscape.
- Solutions: Providing innovative and sustainable investment solutions for client portfolios.
We recognise that there is no one-size-fits-all approach in sustainable investment. The ability to offer the right advice and solutions depends on our deep understanding of our clients’ individual goals and preferences.
Bank of Singapore adopts a “REAP” approach:
- Research-driven approach: Complementing in-house research with third-party expertise to ensure a comprehensive view on ESG-related investments and research
- ESG excellence: Positioning our clients’ portfolios to benefit from persistent, long-term returns, through the selection of sustainable and resilient investment companies.
- Assessment of investments: Incorporating ESG factors into our investment process to understand risks and opportunities faced by an evolving business and regulatory environment.
- Process and performance: Ensuring that investment decisions and portfolio management meet our ESG criteria, including risk assessment and performance outcomes.
Growing Our Sustainability-themed Products and Investing Offerings for Our Retail Customers
- In 2020, we launched the BlackRock ESG Multi Asset Fund, as part of our unit trust offerings to customers. The fund has a comprehensive triple-layered approach to ESG integration in investments. Apart from excluding nine controversial sectors and UN Global Compact Violators, the fund only invests into issuers with an MSCI ESG rating of BBB or above. The fund also seeks out opportunities that drive positive societal change, such as investing in social housing REITs.
- We have also developed an Impact Investing portfolio within our RoboInvest offering. RoboInvest is OCBC’s robo-advisory investment platform based on well-tested algorithm technology powered by a Singapore-based fintech. The Impact Investing portfolio focuses on various environmental investment themes, offering exposures to companies screened for ESG characteristics.
Increasing Household Access to Green Energy through Solar Panel Financing
- In December 2020, OCBC launched Singapore’s first consumer solar panel loan (SPL) in partnership with Sembcorp Power Pte Ltd, a subsidiary of Sembcorp Industries Ltd. The SPL provides financing for solar panel installation on private landed residential properties. While sustainability-linked financing has become significant in the corporate banking segment, the consumer banking segment remains underserved. The SPL will reduce the upfront cost barrier for consumers keen to play their part in saving the earth while helping them to lower their long run energy cost.
Why this is material to us
A thriving society is dependent on a healthy environment. As a business, we must reduce our impact on the environment and do our part to protect the vital ecosystem that supports life on our planet. Not doing so would present risks to the long-term viability of our business and the wellbeing of our stakeholders.
We are committed to reducing the environmental footprint of our physical operations. We also recognise our responsibility to influence and work with our suppliers, customers and other stakeholders to adopt more environmentally-friendly practices.
Sustainable Buildings and Operations
- OCBC Property Services formed a committee to drive the environmental initiatives and programmes.
- Developed Green Guide for tenants/ occupants of our Green Mark Award buildings. The guide showcases the green features of respective OCBC-owned buildings, ongoing efforts and advisory on good practices.
- Currently, six of our buildings and three of our branches have received Green Mark Awards.
- Upgraded and installed new LED lamps with motion sensors in our buildings’ common areas.
- Retrofitted the Bank of Singapore Centre, including lift modernisation to improve energy efficiency.
- Established the OCBC Supplier Code of Conduct which sets out the standards we expect from new and existing suppliers. Areas covered include compliance with law, business integrity and ethics, human rights, health and safety, and environmental protection.
- We continue to purchase biodegradable serviceware and Forest Stewardship Council (FSC)-certified/Programme for the Endorsement of Forest Certification (PEFC)-certified paper for office use.
Promoting Environmentally-Friendly Behaviour
- Encouraging our customers to switch to e-statements which has resulted in a reduction of 10 per cent year-on-year and 33 per cent since 2015. As of December 2020, statements for 68 per cent of applicable accounts were sent electronically.
- Moving towards paperless processes through digitalisation.
- Eliminated the procurement of plastic bottled water in all branches in Singapore.
Why this is material to us
Climate change has had a significant impact on our planet. With rising global temperatures leading to shrinking ice sheets, rising sea levels and the increasing prevalence of extreme weather events, it is widely acknowledged that climate change poses the greatest environmental challenge to our society and businesses today.
Our TCFD Report
In October 2021, we published our first TCFD report. This inaugural TCFD report outlines OCBC’s overarching approach to governance, strategy, risk management, as well as key metrics and targets linked to climate-related risks and opportunities.
Our Climate Change Statement
OCBC recognises that our financial success is intrinsically linked to the overall health of the markets we operate in. We are committed to advancing environmental and social (E&S) progress and to conducting our business in a responsible manner. By doing so, we will be able to support sustainable development in our markets and communities and create long-term value for our stakeholders.
Our Climate Change Statement affirms our support for the Paris Climate Agreement, which aims to keep the increase in global average temperatures to “well below 2°C above pre-industrial levels”. We believe that decarbonisation of the economy must be managed responsibly over time and will adopt a progressive approach to promote the transition to a low-carbon economy. This is aligned with our focus on Sustainable Development Goal 13 of taking urgent action to combat climate change and its impacts.
Our Commitments on Coal Sector Lending:
- We prohibit new financing of Coal-fired Power Plants.
- We prohibit new financing of Thermal Coal Mines.
As part of our ESG Risk Assessment Framework, we perform enhanced E&S due diligence on our clients for all energy-related loans, referencing:
- International Finance Corporation (IFC) Performance Standards;
- Equator Principles (EP); and
- Local/National laws and regulations.
Under our credit evaluation process, we conduct ESG risk assessment on borrowers at least once a year throughout the financing tenor. Additional assessments are conducted if and when significant ESG events arise. In addition, we may impose covenants in our credit facilities that require the borrowers to comply with ESG requirements. If the covenants are breached or our ESG expectations are not met, we will reassess the client relationships, including turning down transactions.
Increasing Sustainable Financing
We will continue to seek and realise opportunities to partner our clients on sustainability performance-linked loans. By offering reduced interest rates for independently-assessed improvements in their ESG indicators, our clients will be financially incentivised and empowered to find innovative ways to enhance their sustainability performance. We are committed to channelling funds to support environmental investments which will in turn spur economic and climate resiliency across our core markets. The green bond market has emerged as an alternative source of funding and a platform to support the financing of qualifying assets/projects that combat climate change and its impacts. These qualifying assets/projects may include renewable energy, energy efficiency, sustainable water and wastewater management, green buildings and others.
Disclosure on Our Climate Change Efforts
OCBC recognises the importance of transparency and believes that comprehensive climate-related disclosures can help drive the global transition towards a low-carbon economy. Since becoming signatory to the Task Force on Climate-related Financial Disclosures (TCFD) in 2019, we have been working towards implementing the TCFD recommendations and continuously enhancing our climate disclosures with the support of a cross-functional internal working group.
Sustainability is a journey and OCBC recognises that more needs to be done to support sustainable development. In line with this approach, we will continue to refine our climate change statement and enhance our responsible financing policies over time. Together with our customers, we will work towards further adopting appropriate sustainable practices and standards laid out by local regulations and to continue to reference international standards and industry best practices.