Banking with a Mission: Taking Green and Sustainable Financing Forward
Published on 12 July 2021
Published on 12 July 2021
Recognising the growing appetite for decarbonisation towards a greener economy, led by the Singaporean Government’s Green Plan and Long Term Low Emissions Development Strategy, banks in Singapore are taking on active roles to ride on this wave of opportunity to rebuild our society for better and greener, post-COVID-19.
Climate change is set to dominate the economies of the future. Its effects are felt globally but the impact on Southeast Asia could be greater than most regions as predicted by the Asian Development Bank1. Having come from mudflats to metropolis, the thriving commercial and financial hub of Southeast Asia is not impervious to the effects of climate change.
The onset of the COVID-19 pandemic has neither reversed long-terms climate change nor the market’s drive to accelerate green financing. On the contrary, there has been a strong and growing appetite for new investments to decarbonise the economy towards a neutral carbon footprint.
Driven on these insights, banks in Singapore have made significant strides in assimilating risk management aspects with environmental risks and climate change facets to find prospects in funding the green economy.
Maybank has embraced this move and actively looks into playing its role as one of Asia’s leading banking groups, to ensure all its business activities are consistent to its core values and stay true to its commitment of ‘No Deforestation, No New Peat and No Exploitation’. It aims to enable a responsible shift to low-carbon economy by achieving a carbon-neutral position of its emissions by 2030 and net neutral carbon emissions by 20502.
Green economy, in particularly green financing has received an immense flip from its nascent beginnings following the announcement of the SG Green Plan and Long Term Low Emissions Development Strategy by the Government3. Leading by example, the Monetary Authority of Singapore (MAS) announced a US$2 billion green investments programme (GIP) among other initiatives, alongside wider plans to incorporate FinTech as a partner in the green finance action plan to drive growth in green finance4.
As the government supercharges the local green sector, both public and private clients will eventually seek to commission more and more sustainable projects to match public demand and government mandates. The current landscape buttressed by the government, serves as an eloquent opportunity for Maybank to contribute its financial market prowess to include mastery of green financing as well.
Out with the yield and in with socially responsible investing
A key misperception is that pursuing sustainability means accepting lower returns, which is no longer the case today, as technological and policy developments have made sustainable investments increasingly attractive in the near future.
Maybank’s in-house research also suggests that sustainability translates to resilience to external shocks – which is the intended purpose of Environmental, Social and Governance (ESG) investing. Specifically, companies that are focused on issues surrounding environment, social and governance tend to be more resilient and, as a result, ESG funds continue to attract capital. This in itself is a wake-up call for private sector actors that being sustainable is a given if they want to future-proof their operations or retain customers.
From a green financing perspective, a lot can be done to power the green transition. Maybank’s sustainability journey has outlined resources put into understanding, measuring, and managing the material issues surrounding ESG. This has transpired in Maybank Singapore’s track record of arranging and participating in Shariah compliant sustainability-linked loans and green loans, totalling S$4.5 billion to date5.
Despite ongoing arguments that the amount of sustainability linked debt issued by banks in Singapore are only a sliver of their overall loan book, there is no doubt that issuances of green bonds worth S$5.7 billion in the corporate debt market over the past year6 is an incremental step in a relatively long race.
Recognising this opportunity, Maybank has recently launched its M25 plan, a five-year plan to implement big changes towards ESG targets with the objective of becoming a regional ESG leader, delivering sustainable return on equity (ROE) while concentrating on customer experience. The plan will concentrate more on digital, building value drivers with significant focus on sustainability throughout Maybank’s operations7.
Putting the Able in Sustainable
The role of green bond or social bond issuance has evolved over the years. At the outset, the main pull factor was because of its marketing benefits. But with sustainability issues now becoming exponentially more relevant to both the corporate sector and investors, it has since transformed into a golden ticket for companies to communicate their vision, strategy and what their action plan is towards climate change, environmental and social issues all in one issuance.
In playing our role as a responsible financial service provider and community enabler, Maybank will front-load its efforts for the next 5 years to achieve ESG targets of 15% return on equity (ROE) by 2025, in line with the government’s vision of making Singapore the pinnacle of sustainable prosperity. The mission to drive real economic growth that meets social, economic, and environmental needs is in line with our mission of Humanising Financial Services.
With Singapore representing about half of the ASEAN debt issuance last year as well as its position as a regional financial leader, any shifts in the green ecosystem taken by the city-state will no doubt have a pronounce impact in the region. Leveraging on the momentum that has been built, it is therefore vital that financial institutions play a greater role in financing the SDG funding gap, and gain from the opportunities that proliferation of green sectors offers.
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