Our financing plays a role in shaping the behaviours of our customers towards sustainable development. We expanded our Group Core Credit Risk Policy to incorporate the principles and approach for managing ESG issues in our lending practices and capital market activities. Supplementing the policy is the Responsible Financing Standard, which provides structured guidance to assess potential ESG risks.
Our risk assessment approach ensures that material ESG issues are considered for all new credit applications, capital market transactions, and during periodic reviews. Specific sector guides are established to provide further guidance on ESG risks pertinent to that industry. These are developed taking into consideration our strategy and level of exposure to a sector and presently cover seven sectors, namely agricultural commodities, palm oil, chemicals, oil and gas, mining and metals, power generation and infrastructure. We are guided by sectoral standards, and industry best practices such as the International Finance Corporation Performance Standards and World Bank Environmental, Health and Safety Guidelines.
The ESG risk assessment enables us to develop an overall understanding of the customer’s approach to managing ESG issues (including commitment, capacity and track record). Where we identify significant issues, additional due diligence would be required. This may entail site visits, independent reviews or certification requirements. Escalation to relevant industry and sustainability specialists, and approval may be required.
If any customer is suspected to be involved in undesirable ESG practices, we will promptly engage the customer. If the customer is not willing to take steps to adequately manage and mitigate the identified ESG risks, we are prepared to turn down the transaction or reassess the banking relationship.