Sustainable finance regulations and guidelines
Regulations and guidelines play a key role in shaping the sustainable finance landscape. They provide financial institutions with clear direction, encourage the development of rigorous policies and green financial solutions, and help to level the playing field.
WWF supports the harmonisation and implementation of regulations and guidelines that strengthen the resilience of the regional finance sector by:
- Interpreting the implications of global regulations for local and regional contexts
- Identifying gaps in sustainable banking regulations and guidelines to support regulators and industry associations in strengthening regulations and guidelines and harmonising these across ASEAN
The harmonisation of sustainable banking practices across ASEAN would bring clear benefits, as most regional banks and their clients have operations across the region. Financial regulators and banking associations have a key role to play in creating a level playing field, and in encouraging a ‘race to the top’ on sustainable finance, facilitating the financial sector’s contribution to the Paris Agreement and regional sustainable development objectives.
The map below shows the regulations or guidelines pertaining to sustainable banking. The once listed are issued either by financial regulators or banking associations in ASEAN, already in place or announced at the time of publication of this report.
The Financial Services Authority (OJK) issued the Regulation. No. 51/POJK.03/2017 on the Application of Sustainable Finance. For large commercial banks, the regulation came into force on January 1st, 2019.July 2017
Following public consultation, Bank Negara Malaysia (BNM) issued the Value-based Intermediation Financing and Investment Impact Assessment Framework for Islamic banking.November 2019
The country has not yet issued any guidelines or regulations on sustainable finance.
Bangko Sentral ng Pilipinas (BSP) announced the upcoming issuance of a regulatory framework for sustainable finance.By 2020
The Monetary Authority of Singapore (MAS) announced its plan to release environmental risk management guidelines for consultation early 2020.November 2019
The Thai Bankers’ Association (TBA) issued Sustainable Banking Guidelines – Responsible Lending, with support from Bank of Thailand (BOT).August 2018
Assessment framework – scope and methodology
As part of its sustainable finance work with financial institutions and regulators in ASEAN, WWF has developed a framework to assess sustainable banking regulations and guidelines. The framework reflects WWF’s insights on what constitutes a robust foundation of regulatory practices to ensure that the ASEAN banking sector is resilient in light of the climate and environmental crisis, and is aligned to support the objectives of the Paris Agreement and UN Sustainable Development Goals.
The framework provides a basis for constructive dialogue, engagement and capacity-building with financial regulators and banking associations, with the goal to strengthen and harmonize regulatory and banking practices across ASEAN. The framework is built on six pillars and 25 indicators, described below.
You can find the full assessment in the publication “Sustainable Banking in ASEAN – raising the bar”
Strategy & Governance
Policies & Progress
Portfolio Risks & Impacts
Disclosure & Transparency
We recommend financial regulators to:
ASEAN financial regulators and banking associations have significantly strengthened their expectations for banks to integrate E&S considerations. However, in light of the climate and environmental crisis, regulators and banks should take additional steps to enhance the resilience of the financial sector.Download report
Sector specific policies
Sector policies help financial institutions to understand and mitigate the risks associated with financing supply chain companies. This requires engagement with clients and portfolio companies to enforce, but also to support and work with them to achieve sector specific criteria and standards.
There exist different tools and guidance for financial institutions that help to establish a robust sustainable financing policy and screen their portfolios to determine the companies and issue areas that pose the greatest risk to their institution.
For soft commodity supply chains a useful benchmarking tool is: SCRIPT.FINANCE
Palm oil sector
In the palm oil sector, financial institutions and other stakeholders can play this role through the promotion and support for the Roundtable on Sustainable Palm Oil (RSPO) standard, as well as other rigorous, science-based sustainability criteria. This requires engagement with clients and portfolio companies to enforce, but also to support and work with them to achieve these criteria. This should be complemented by organizing client outreach, education and capacity building, as well as by supporting responsible land use planning, landscape approaches, smallholder inclusivity and supply chain traceability and transparency.
Developing and maintaining infrastructure systems that are sustainable is a central part of mitigating the environmental impacts of development. Significant progress has been made in recent years to develop tools and assessments that can help infrastructure investors measure and report on the sustainability of their projects. We are currently working on best practice sector guidlines for the finance sector.
Mining and metals
Steel, aluminium and other metals are vital resources to our civilisation. Without them, our current way of life would be inconceivable. At mining sites, primary natural habitat is destroyed and acid drainage from
sludge retention ponds and mine dumps poisons soils and groundwater. The
processing stage, is highly energy intensive and contribute to climate change. We are currently working on best practice sector guidlines for the finance sector.