Banking regulators and investors in Southeast Asia sense the urgency to tackle climate change and environmental degradation, but banks in the region are slow to respond, the World Wildlife Foundation says.
ASEAN is facing an «existential threat» as a result of climate change and environmental degradation, but banks in Southeast Asia are not responding fast enough, according to the 2019 «Sustainable Banking Assessment» published by the World Wildlife Foundation on Tuesday.
WWF said that only 9 percent of banks it surveyed have a strategy to manage climate-related risks or conducted climate-risk assessments even though regulators increasingly expect them to test the resilience of their loan books to climate risks and report the results.
The survey, which benchmarks 35 ASEAN banks in six countries against a set of environmental, social and governance (ESG) indicators, noted that only four of them fulfilled at least half of the 70 criteria, and 18 banks fulfilled less than a quarter of the criteria. However, WWF noted that since the 2018 report, 74 percent of banks surveyed have made progress.
«The uneven progress undermines the region’s response to impending threats as unsustainable activities continue to be financed,» the report said.
Finance Sector Vulnerable to Climate Risk
The report noted that 91 percent of ASEAN banks continue to fund coal-fired power plants, which increases their exposure to climate-related risks. It also said that banks are not adequately recognizing water-related risks, despite the region experiencing more intense and frequent water-related disasters as a result of climate change.
It pointed out that banks are «leaving money on the table» by not actively supporting efforts to transition to a low-carbon economy, citing an estimated $3 trillion financing gap for green infrastructure between 2016 and 2030.
«ASEAN’s economies are very much interdependent, which magnifies the effects of climate change and environmental destruction,» Jeanne Stampe, WWF head of Asia Sustainable Finance, said.
«To ensure that businesses are resilient and the people of ASEAN have a secure future, ASEAN banks need to manage climate and other material environmental risks and opportunities in their portfolios.»
