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Companies can take social responsibility to the bank

Banks should help companies develop sustainable practices

Asia has achieved remarkable growth and prosperity over the past decades.

It is not without cost though.

Part of the region's rapid expansion happened at the expense of its environment and scarce natural resources. To ensure that our economies can continue to develop and grow sustainably, we need to ask ourselves: What intervention do companies have to make today to be operating years from now?

For companies, it is a constant balance between generating growth and returns, and minimising negative impact on the environment, health and safety.

As banks can influence capital allocation by assessing and managing risks, the industry is positioned to play a bigger role in the development of sustainable finance.

It is not about exiting sectors because they cause harm to the environment or community - these industries support families and sustain economies. It is more about supporting practices that promote sustainable business, employment and growth while being socially responsible.

Providing finance responsibly is full of predicaments though. Banks have to balance economic gains with environmental and social (E&S) impact.

Banks can also become vulnerable to reputational risk from charges of their clients' environmentally and socially inappropriate behaviour.

As an international financial institution that does most of its business in emerging markets, we are cognisant of the difference we can make through our choice to back the right companies.

Since 1997, we have implemented a comprehensive approach to managing E&S risks.

We also understand and promote guidelines and policies to help clients address challenges and capitalise on sustainable growth opportunities.

But why should companies invest time and resources to meet stringent standards that could compromise near-term gains? And how relevant are responsible business actions to Singapore?

Situated between Malaysia and Indonesia, Singapore is no stranger to the perennial haze caused by forest fires used to clear land for agriculture.

The haze in 2015 resulted in disruptions including school closures. For the first time, consumers in Singapore boycotted products from companies involved in causing the haze, and had retailers withdraw those brands from their shelves. It cost the country some $700 million of economic losses.

The realisation hit home. The need for sustainable practices has gone beyond building a green environment. It is also about the people and their community.

Remedial actions were taken.

In October 2015, the Association of Banks in Singapore issued guidelines on responsible financing. A month later, Indonesia's banking regulator said green financing would be compulsory for all banks in Indonesia by 2018.

In 2016, the Singapore Exchange introduced sustainability reporting on a "comply or explain" basis to increase non-financial disclosure transparency.

The Monetary Authority of Singapore is a supporting partner of the Collaborative Initiative for Green Finance in Singapore, an initiative that is being driven by the Singapore Institute of International Affairs in collaboration with the UN Environment Inquiry.

SUSTAINABILITY STANDARDS

Opportunities based on sustainable development principles could help the private sector unlock US$5 trillion (S$6.8 trillion) in business opportunities and create 230 million new jobs in Asia by 2030, the Business & Sustainable Development Commission said in June.

Banks' success as a business is intrinsically linked to the health and prosperity of their markets. While we help clients that meet sustainability standards to build sustainable results, it is also about working with those who are not compliant today but are committed to making the right changes.

As sustainability benchmarks up the ante on corporate responses to the growing social demands on organisations, helping companies secure their social licence to operate can only become the way forward.

The writer is the chief executive officer, Standard Chartered, Singapore and Asean Markets (Malaysia, Vietnam, Thailand & Rep Offices)

BANKSMonetary Authority of SingaporeEnvironment