Report from leading banks in Singapore demonstrates the business case for nature
A groundbreaking collaboration between DBS, OCBC, UOB and the Monetary Authority of Singapore in conjunction with the University of Cambridge Institute for Sustainability Leadership shows how banks can build internal capacity to better understand the nature risks and dependencies in their portfolios.
Using the palm oil sector as a use case, the group undertook scenario analysis to capture the possible credit impact of nature risks on their customers.
The global palm oil industry is worth about US$60 billion and is a major global sector. It is concentrated in Southeast Asia, primarily in Indonesia and Malaysia, which together account for over 85% of the world's palm oil production. With growing demand for palm oil, it is crucial to understand the industry's vulnerability to nature-related risk events.
Since 1960, the oscillation of weather patterns between the dryer, hotter El Niño and the wetter, cooler La Niña events have become more frequent and intense. This is one of the most important climate phenomena on Earth and has significant impacts in the region including drought, flooding and wildfires.
This has potentially serious implications for the agriculture sector and for palm oil companies in particular. The scenario analysis showed varied impacts across different palm oil companies. Some were highly resilient while others were significantly impacted by nature risks such as droughts and floods. This demonstrates a clear commercial need to understand nature risk and the consequences for each customer.
In addition to showing a clear business case for the banks to invest in nature, the work is aimed at encouraging and accelerating assessments of nature-related risks across the financial sector. Using the report as a template, other financial institutions are enabled to better understand the nature risks and associated commercial impacts across their own portfolios. While this research is location specific, it informs global transformational change.
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The full report can be viewed here: Building Capacity to Identify and Assess Nature-Related Financial Risks | Cambridge Institute for Sustainability Leadership (CISL)
About UOB
UOB is a leading bank in Asia. Operating through its head office in Singapore and banking subsidiaries in China, Indonesia, Malaysia, Thailand and Vietnam, UOB has a global network of more than 470 branches and offices in 19 markets in Asia Pacific, Europe and North America. Since its incorporation in 1935, UOB has grown organically and through a series of strategic acquisitions. Today, UOB is rated among the world’s top banks: Aa1 by Moody’s Investors Service and AA- by both S&P Global Ratings and Fitch Ratings.
For nine decades, UOB has adopted a customer-centric approach to create long-term value by staying relevant through its enterprising spirit and doing right by its customers. UOB is focused on building the future of ASEAN – for the people and businesses within, and connecting with, ASEAN.
The Bank connects businesses to opportunities in the region with its unparalleled regional footprint and leverages data and insights to innovate and create personalised banking experiences and solutions catering to each customer’s unique needs and evolving preferences. UOB is also committed to help businesses forge a sustainable future, by fostering social inclusiveness, creating positive environmental impact and pursuing economic progress. UOB believes in being a responsible financial services provider and is steadfast in its support of art, social development of children and education, doing right by its communities and stakeholders.
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