MAS: Banks should assess clients’ haze-related risks and take action where necessary

The Monetary Authority of Singapore (MAS) requires banks to engage clients that may be involved in activities causing the haze to understand fully the extent of their links to haze pollution and whether they have taken appropriate fire prevention and control measures. Where necessary, banks should consider measures such as reviewing financing terms.

In a statement on Wednesday (28 October), MAS said banks should refer to information released by the National Environment Agency (NEA) under the Transboundary Haze Pollution Act (THPA) to identify, assess, manage and monitor material environmental risks arising from their business activities and exposures.

MAS said banks that find their clients may be involved in haze-causing activities should engage them thoroughly to understand the extent of their links to forest fires in Indonesia and whether they have taken appropriate measures to prevent, detect and extinguish fires.

Where a company is found to pose higher environmental risks, banks should review its financing terms, limit their exposure or reassess the client relationship, MAS stressed.

Said MAS, “Clear breaches of environmental laws would warrant stronger measures, including limiting exposures or exiting the relationship.”

“MAS supports the local banks’ clear stance against burning practices and notes that they will take strong action where warranted.”

OCBC Group Chief Sustainability Officer Mike Ng told Lianhe Zaobao in response to queries that if there was evidence that a client’s activities breached the bank’s sustainability requirements or relevant laws, the bank would take appropriate measures, including reducing financing support or terminating the business relationship.

Ng said, “We are committed to ensuring that our financing supports sustainable business practices and does not contribute to activities such as deforestation, illegal logging, or open burning.”

A DBS spokesperson said the bank takes a “zero-tolerance” approach to land burning and regularly reviews clients’ compliance with the relevant requirements. “If the company is unable or unwilling to take steps to adequately mitigate the identified risks, the bank may decline the transaction and further reassess the banking relationship.”

A UOB spokesperson said the bank requires clients to conduct their businesses responsibly and adhere to the principles of “no open burning, no peat development and no deforestation”. If clients fail to comply, the bank will take decisive action, including terminating business relationships.

NEA had earlier issued notices to 10 locally registered companies, requiring them to provide information on their land concessions in Indonesia, corporate affiliations and fire prevention measures to assist investigations into transboundary haze pollution.

The 10 companies are Asia Pulp & Paper, Asia Pulp & Paper (China), Wilmar International, Bumitama Agri, Golden Agri International (GAI), First Resources, Indofood Agri Resources, Kencana Agri, and TSH Resources Berhad subsidiaries TSH Global Plantation and TSH Oversea.

Deputy Prime Minister and Minister for Energy and Trade and Industry (Trade) Gan Kim Yong, Senior Minister, Coordinating Minister for National Security and Minister for Home Affairs K Shanmugam, and Minister for Sustainability and the Environment Grace Fu also summoned senior executives from these companies on Wednesday. They included Wilmar International Chairman and Chief Executive Officer Kuok Khoon Hong and Golden Agri-Resources Chairman Franky Oesman Widjaja.

After the meeting, an Asia Pulp & Paper spokesperson said in a statement that the company would respond proactively to NEA’s notice and cooperate fully with the Singapore authorities.

In a filing with the Singapore Exchange after the meeting, Golden Agri-Resources (GAR) said it was aware that the Singapore authorities had requested the companies’ cooperation with existing regulatory processes and the proposed independent assessment framework. It added that GAR and GAI reaffirm their commitment to cooperate fully and transparently and to provide such information and assistance as may be required in connection with these matters.

Singapore Exchange Regulation (SGX RegCo) also issued follow-up queries to seven locally listed companies, asking them to explain in detail whether their measures to address forest fire risks were adequate and whether they had links to the 10 Indonesian companies that received preventive measures notices.

In a statement on Wednesday, Wilmar International said fires had occurred on its subsidiaries’ plantations in Indonesia’s West Kalimantan province, but investigations suggested they had originated outside the plantation concessions. It also said the group had no operational, supply chain or business dealings with the Indonesian companies named earlier.