Building a sustainable future

Responsible Financing

Why this is material to us

The growing threat of climate change and the urgent need for sustainable development pose 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, our clients and society.

We recognise that doing so is socially responsible and is the best way to help the Bank mitigate climate-related risks and safeguard our customers' long-term success. Please refer to our Climate Change Statement for more information.

Our management approach

Managing risks and ensuring that we are lending responsibly have always been key tenets of our approach at OCBC. The Board (through the Board Risk Management Committee) has oversight of effective management of all risks, which includes ESG risks such as climate change. We recognize that our financing activities may impact the environment and society, and aim to manage the risks involved. Climate change will also have an impact on our clients, and give rise to physical and transition risks for the Bank.

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 ESG considerations into our credit and risk evaluation process for our lending practices and capital market activities.

Our responsible financing framework

Our Responsible Financing Framework defines our approach and commitment in managing ESG risks for lending activities. The Framework applies to key entities of OCBC Bank, comprising overseas branches, offices and wholly and majority-owned subsidiaries. The Framework sets the Bank’s ESG-related approach to lending, debt issuance and debt underwriting activities for new and existing corporate, commercial and institutional clients. Our Responsible Financing Framework describes our ESG risk assessment process, exclusions and commitments which are further elaborated below.

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 risks where transactions that carry high ESG risks are subject to enhanced evaluation and approval requirements.

Find out more about our ESG risk management process.

Our commitments

Exclusion List

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. Our exclusion list lays out the activities we will not finance. Some of these are sector-specific while others are cross-cutting.

Specifically, our sector-specific prohibitions include:

  • Energy: We will not provide new financing / refinancing for coal-fired power plants or new financing / refinancing to clients where more than 50% of their total power generation capacity / revenue comes from coal-fired power plants.
  • Mining and metals: We will not provide new financing / refinancing for thermal coal mines or new financing / refinancing to clients where more than 50% of their mines comprised of thermal coal or more than 50% of revenue comes from 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 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 Convention; and
  • 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 Responsible Financing Sector-Specific Policies

Our Responsible Financing sector-specific policies outline our requirements and expectations for 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. 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 Responsible Financing sector-specific policies cover all the sectors identified as ‘high risk’ by the Association of Banks in Singapore (ABS) Responsible Financing Guidelines:

  • Agriculture and Forestry
  • Chemicals
  • Defence (prohibited under our exclusion list)
  • Energy
  • Infrastructure
  • Metals and Mining
  • Waste Management

Find out more about our Responsible Financing Sector-Specific Policies. Our policies are regularly reviewed and updated in response to the changing external environment.

ESG resources and training

We have dedicated resources that focus on the management of ESG risks and the effective application of our ESG policies.

The Responsible Financing framework and policies were established since 2016, with members from both business units and risk functions across the Group spearheading the development and implementation. Relevant stakeholders across business units and risk functions continue to be engaged during the periodic review process of the Responsible Financing framework and policies.

As regulatory developments advanced to include environment / climate risk management, over the years the bank has evolved and established dedicated ESG Risk and Sustainability teams to oversee ESG and climate risk related developments at the group and across our key markets. We have dedicated ESG specialists focused on ESG risk management across the Group.

Holistic training is provided by subject matter experts from within and outside the Bank to the Board of Directors and senior management as and when needed. Training and updates provided to the Board of Directors and senior management include global trends and developments in ESG and climate-related issues.

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 are updated regularly on developments in OCBC’s Responsible Financing policies. In 2021, more than 790 relationship and credit risk managers attended our annual ESG Risks training which include topics such as MAS’ Guidelines on Environmental Risk Management (EnRM), climate risk management and our pilot TCFD Report. New relationship managers and credit approving officers are required to complete training that equips them with an understanding of the Bank’s Responsible Financing policies and ESG risk assessment process.

Engagement with stakeholders

We regularly engage our key stakeholder groups, as this allows us to deepen our understanding of their concerns and build industry capacity in responsible and sustainable financing as well as climate risk management in financial institutions.

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.

OCBC is a member of the MAS-convened Green Finance Industry Taskforce (GFIT) which focuses on addressing environmental and climate-related risks for financial institutions.

Signatory to the Equator Principles

OCBC adopted the Equator Principles as an initiative for responsible financing. The 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.

As a signatory to the Equator Principles, we have integrated requirements from the Equator Principles into our ESG Risk Assessment Process for transactions within the scope of the Equator Principles. In 2021, an Equator Principles Implementation Procedure was established to provide relationship managers with detailed guidance on conducting ESG risk assessment for applicable transactions.

Find out more about the Equator Principles.

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.

Sustainable Financing

Why this is material to us

Financial institutions have a critical role to play in supporting sustainable development, in particular to accelerate the global transition to a low-carbon economy. As a market leader, we have the chance to catalyse sustainable solutions by directing capital flows to projects with meaningful social and environmental impacts or incentivising others to improve their sustainability performance.

Our management approach

We aim to be an Asian leader in sustainable finance by promoting banking products and services that embed sustainability in all our clients’ businesses within our wide international network.

Our dedicated Sustainable Finance Group leads the Bank’s efforts to partner with like-minded customers, ensuring that the Bank offers bespoke and credible sustainable financing solutions that are aligned with international market standards and best practices. With sustainability becoming a strategic priority for many clients in all sectors, we seek to partner with our customers and all stakeholders in driving this agenda forward to continue to offer them meaningful and innovative sustainable finance solutions. This is how we want to contribute to Singapore’s ambition to become a regional sustainable finance hub.

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, as at 31 December 2021, OCBC Bank achieved S$34 billion in sustainable finance commitments, surpassing our S$25 billion by 2025 target. We have now doubled our target to grow our sustainable financing portfolio to S$50 billion by 2025.

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.

New Initiatives and ongoing efforts

Easier access to sustainable finance for SMEs

  • We launched the OCBC SME Sustainable Finance Framework in November 2020, the first of its kind in Singapore, designed to make it simpler and less costly for SMEs to gain access to sustainable financing.
  • SMEs engaging in sustainable activities such as energy efficiency, renewable energy and clean transportation, in 9 green project categories under the Green Loan Principles developed by the Loan Market Association, would be eligible for loans of up to S$20 million.
  • We have offered green loans to over 200 SMEs through this process and the framework has also been implemented in Malaysia, Indonesia and Hong Kong SAR.

For more details refer to OCBC SME Sustainable Financing page.

Green loans for Singapore’s Small to Mid-Sized Developers and Building Owners

  • In 2021, we collaborated with the Building and Construction Authority of Singapore (BCA) to provide easy access to green loans for building owners, developers and small and medium-sized enterprises (SMEs).
  • We leveraged BCA’s newly launched Building Energy Efficiency Assessment (BEEA) tool to avail a market-first S$148 million green loan facility for Tong Eng Group, one of Singapore’s leading private developers. The BEEA tool enables SME building owners and tenants to predict the energy performance of their buildings.
  • This makes it simpler and more cost-effective for developers and SMEs to obtain green financing and to accelerate the shift towards green buildings and construction.

Building Capacity on Sustainability Issues

  • As an Asian bank, OCBC has a sizable business with corporates in the agriculture sector. Deepening our knowledge of ESG issues in the agricultural sector is critical for impactful client engagement.
  • The Bank partnered with ZSL (Zoological Society of London), a renowned international conservation charity, in offering a series of deep dive sessions on sustainability issues in the palm oil, forestry and rubber sectors for corporate customer-facing employees in Malaysia, Indonesia and Singapore.
Sustainability-themed Products and Investing

Why this is material to us

Sustainable investing and sustainability-linked products have been gaining momentum globally in recent years amid greater demand from institutional and individual investors. This is driven by evidence that companies with strong Environmental, Social and Governance (ESG) practices are more resilient and profitable over the long term. As a regional leader in responsible banking, we seek to meet this demand for sustainable investment products.

Our management approach

We recognise that there is no one-size-fits-all approach to sustainable investing for all customers. The ability to offer the right advice and solutions centres on our deep understanding of our clients’ individual goals and preferences. As a trusted partner and advisor, we are able to provide unique and diverse 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 wealth management client segments:

  • High-net-worth clients managed by Bank of Singapore (BOS), a wholly-owned subsidiary of OCBC Bank; and
  • retail clients managed by OCBC’s Consumer Financial Services (CFS) division.

New initiatives and ongoing efforts

Bank of Singapore’s approach to developing sustainability-themed products and investing:

  • The “REAP” philosophy incorporate ESG considerations into BOS’ investment methodology to identify additional sources of risk and return based on key non-financial factors, which allows for better decision-making.
  • In 2021, BOS set up a Sustainable Investment Committee to approve and evaluate BOS’ sustainable investment frameworks and policies.

What “REAP” stands for:

The Electric Vehicle portfolio

  • In August 2021, we launched the Electric Vehicle (EV) portfolio as part of our OCBC RoboInvest platform. This platform is for all segments of CFS individual customers with OCBC Digital access.
  • A proprietary methodology has been applied to ensure that only high-quality equities are included in the portfolio.
  • In addition, proprietary algorithms on the OCBC RoboInvest platform monitor and rebalance portfolios on a quarterly or semi-annual basis. This theme resonated well with our clients and the EV portfolio was the second most popular among new investors, contributing to over 20% of new investments from September to December 2021.

Sustainability training programme

  • CFS has curated a bespoke ESG training programme with Amundi Asset Management.
  • The online training course was rolled out to all sales staff and wealth management product managers in Singapore and Malaysia in November 2021, with the objective of building awareness and knowledge in sustainability and how it translates into responsible investing, ESG criteria for product selection, and ultimately client-facing advisory.
  • We have achieved 100% completion for Singapore and Malaysia staff.

Sustainability-themed client webinars and events

To generate awareness of climate change and sustainability-related issues, Bank of Singapore organised four events in 2021, covering topics such as business sustainability practices, carbon footprint, climate action and sustainable investing:

  • Beyond 2021 – The Great Reset Breakout session: Greening the Recovery
  • ESG – Future of Mobility
  • Singapore Redefined: The Green Agenda Webinar
  • BOS Sustainability Summit

Most notably, BOS launched its first Sustainability Summit – The Climate Connection in 2021, bringing together thought leaders from private and public sectors to provide perspectives on key climate change issues and risks; it delved into the role investors play in helping to achieve sustainability goals in Asia.

Environmental footprint

Why this is material to us

As a responsible business, we aim to reduce our impact on the environment and do our part to protect the vital ecosystem that supports life on our planet. By not taking substantial actions now, we risk the long-term viability of our business and the wellbeing of our stakeholders.

Our management approach

We are committed to reduce the environmental footprint of our physical operations. We unveiled our target to achieve carbon neutrality for OCBC’s banking operational emissions in 2022. This will be supported by a suite of environmental initiatives to increase energy efficiency and reduce consumption.

Climate change

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.

View our TCFD report

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.

Moving Forward

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.