Building a sustainable future
Why this is material to us
The growing threat of climate action 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 exclusions list
Our exclusions list lays out the activities we will not finance. Some of these are sector-specific while others cut across them.
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:
- Activities involving harmful or exploitative forms of forced labour or harmful child labour, and products associated with these.
- Projects located in or having significant impact on United Nations Educational, Scientific and Cultural Organisation (UNESCO) World Heritage Sites and Wetlands of International Importance designated under the Ramsar Conventions as well as 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.
The OCBC Group 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 entire Group, meets regularly and shares about ESG developments and their implications to the business.
The Group 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. This Group setup has been replicated locally and, on an individual and collective basis, members of our senior leadership team as well as Board of directors 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 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.
Value-Based Intermediation Community of Practitioners (VBI CoP)
OCBC Al-Amin Bank Berhad is a member of the Value Based Intermediation (VBI) Community of Practitioners that drives the implementation of VBI including the VBI scorecard, VBI Assessment Framework (VBIAF) and VBI Sectoral Guides. OCBC Al-Amin is also part of the 2nd Cohort for the development of the Sectoral Guide for Oil & Gas.
Signatory to the Equator Principles
OCBC Group 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.
Signatory to United for Wildlife Financial Taskforce
The OCBC Group 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 one of the largest Financial Institutions (FIs) in the region, OCBC has an important role to play not only to support economic growth and business activities, but also for investing now for a better future for our business, stakeholders and the communities we serve. We have seen how the role of banking and financial institutions has evolved from as an intermediary for borrowing and lending activities to driver of capital to facilitate the transition towards a greener and sustainable approach.
OCBC’s groupwide strategy, which instils sustainability into our financing approach, has enabled us to provide optimal solutions to our clients to realise economic benefits from sustainable financing. Over the years, we have gradually built our sustainable financing product suite to cover the spectrum of both conventional and Islamic financing solutions, achieving several industry firsts along the way.
As part of our continuous effort to drive innovation as a market leader for sustainable finance in both banking and capital markets, OCBC entered into a Memorandum of Understanding (MOU) with Bursa Malaysia Berhad to jointly develop sustainable financing options that recognise PLCs' ESG credentials in accordance with the FTSE4Good assessment criteria. Through this initiative, accelerated ESG adoption and improved ESG ratings will grant PLCs’ the opportunity for inclusion into the domestic capital market's ESG index – FTSE4Good Bursa Malaysia Index.
Over the years, OCBC has structured multiple award-winning and first-of-its-kind sustainable financing instruments:
- World’s first Islamic Multi-Currency Sustainability-linked Financing for Axiata Group
- Malaysia’s first ASEAN Sustainability SRI Sukuk for Edra Solar
- Malaysia’s first Sustainability-linked Bond for Sunway REIT
Our effort in advocating sustainability and ESG best practices through our bespoke sustainable financing instruments has won us several awards and accolades:
- Green and Sustainable Finance Deal of the Year and Service Awards
- Islamic Finance Best ESG Green Financing in Southeast Asia (Malaysia)
- Malaysia International Initiative of the Year for Green Financing
- Best ASEAN Sustainability SRI Sukuk (Malaysia & Regional)
In addition to a complete suite of business banking sustainable financing solutions, OCBC Malaysia also launched a solar panel financing plan for residential homes where customers may opt for refinancing with an increase in line of completed residential property from another bank, or an increase in line/top-up of an existing OCBC Home Loan/Home Financing-i, via the OCBC Solar Panel financing scheme.
In June 2020, OCBC Bank 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. Contributing to this Group target, OCBC Malaysia aims to achieve RM7 billion in sustainable financing portfolio 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.
Notable sustainable financing transactions
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 & services that help our customers achieve not only their financial goals, but also their aspirations to contribute to a more sustainable world.
At OCBC Malaysia, our ESG product offerings cater to retail clients, high-net-worth clients, and corporates. Our 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.
- Awareness: Helping clients better understand the ESG landscape & potential of sustainability-themed investments through seminars, events and publications.
- Solutions: Provide and source for more innovative & sustainable investment solutions for client portfolios.
Recognising the value of employees well-versed in the nuances of ESG investing, the Bank is committed to training & upskilling our staff. OCBC Malaysia collaborated with Group CFS and Amundi to roll out the “OCBC - Amundi ESG Training Series: Responsible Investment”. Though targeted at all customer-fronting staff, this training is also extended to all retail banking staff as we believe shared knowledge is crucial for building a strong foundation to allow these values to be integrated at every level of the Bank – which will thereafter translate into responsible decision-making, financing, investing, product development, and client-facing advisory.
We are in the midst of establishing a Sustainable Investment Framework (SIF) which will guide advisory and investment product due diligence, selection and recommendations.
In 2021, we launched an additional 14 new sustainability-linked funds bringing the total number of sustainability-linked funds offered to 68. Of the new funds launched, 10 are ESG funds that are rated by an independent rating agency and 4 qualify as Sustainable and Responsible Investment (SRI) funds under the Securities Commission guidelines .
Alongside this, we have 30 independently-rated ESG bonds as at October 2021 and achieved our AUM target size ahead of time.
Our retail product suite includes solar panel financing plans for residential homes and Wealth Financing facilities that can be pledged for ESG/sustainability-linked investments.
In October 2021, we published a dedicated retail-specific ESG page on the Bank’s website where customers who are keen may learn more about ESG/Sustainability and our product offerings, and access advisory pieces by the Bank’s Head of Research and Advisory.
OCBC Malaysia’s first Tree Planting Initiative tied-in with Unit Trust purchases
In October 2021, we sealed a fund distribution partnership with Maybank Asset Management Sdn Bhd (MAM), marking a major move in our journey towards expanding our ESG offerings. Through this partnership, we offer a unique scheme whereby a tree is planted for every investor of a sustainable unit trust product from MAM that is distributed by us. The trees will be planted along the lower end of the Kinabatangan River in Sabah by APE Malaysia. The partnership officially kicked off on 15 November 2021 with three of MAM’s global unit trust funds as a start, namely Maybank Global Sustainable Equity-I Fund, Maybank Global Sustainable Technology Fund and Maybank Global Mixed Assets-I Fund, all of which will be distributed by OCBC Bank. We hope to have at least 5,000 sign-ups in the three months following the launch so that 5,000 trees can be planted over a half-year period (based on APE’s rate of 800 - 1,000 trees a month). In the longer term, we are looking to embrace a wider cross section of society – those who invest in other sustainable funds through the Bank as well as support other reforestation efforts across Malaysia.
Increasing customers’ knowledge of Sustainable Investing
In November 2021, we held a panellist-moderator webinar titled “The Future & Now: Towards a Greener Environment & Sustainable Alpha”. This event covered what ESG is, how we can do our part in contributing towards a more sustainable future and included some practical solutions via available products. This event saw close to 450 participants and responses were highly positive as most found the session beneficial, engaging, insightful and informative.
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 Malaysia established a Branch ESG Committee consisting of its Branch Operations management team and Sustainability Champions from the branches to drive environmental initiatives and programmes across our branch network.
We replaced all conventional lighting with LED lights at the common areas of the head office including the lift lobbies, washrooms, pantries, corridors, car parks and cafeteria for better energy efficiency and to reduce energy consumption.
We recalibrated all vending machines at the Bank to achieve 1,729kwh in energy savings per month.
We eliminated individual wastepaper baskets at the head office staff desks in favour of shared bins segregated by recyclable and non-recyclable waste to encourage more conscious waste management.
The OCBC Supplier Code of Conduct 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 service ware and Forest Stewardship Council (FSC)-certified/Programme for the Endorsement of Forest Certification (PEFC)-certified paper for office use. Thermal paper rolls & PIN mailers used for all of the Bank’s ATMs & CDMs are also FSC and PEFC certified.
All Multi-Function Printers (MFPs) procured by the Bank have MyHijau Certifications with Compliance Category: Green Label Certification (ISO 14024 Type I ECO-Labels).
Promoting Environmentally Friendly Behaviour
We actively encourage our customers to switch to e-Statements and suppress printing of hardcopy transaction slips for over-the-counter transactions at branches (the same information is available via customers’ mobile or internet banking application). In 2021, we successfully saved more than RM1.23 million in postage and printing costs.
Internally, many of our processes are increasingly going paperless through digitalisation, leading to a significant reduction in paper consumption. For example, our Central Procurement Office reduced paper printing for Purchase Order Issuances by 62% in 2021.
Through various departmental initiatives, staff have also been provided with reusable water bottles, thermos flasks, straws and cutlery sets – small steps towards managing waste and reducing reliance on single-use plastics.
We began issuing monthly ESG newsletters to our suppliers & vendors in August 2021, to promote the sharing of best practices or key learnings amongst our suppliers as well as to communicate the Bank’s position.
Why this is material to us
Climate action 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 action poses the greatest environmental challenge to our society and businesses today.
Our TCFD Report
In October 2021, the Group 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 action 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 action 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 action 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 action 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 action 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 action 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.