TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Securing the social license to operate
Because banks are able to influence capital allocation by assessing and managing risks, the industry is well positioned to play a bigger role in the development of sustainable finance.
Change Size
A teller on a bank. Because banks are able to influence capital allocation by assessing and managing risks, the industry is well positioned to play a bigger role in the development of sustainable finance. (Shutterstock/File)
A
sia has achieved remarkable growth and prosperity over the past decades. It is not without costs 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 continuously ask ourselves: What intervention do companies have to make today to be operating years from now?
For many companies, there is a constant balance between generating growth and returns, and minimizing negative impact on the environment, health and safety. Instead of turning away companies that cause stress to the environment and community, a more practical solution is for governments and banks to work with them to meet sustainable standards.
Because banks are able to influence capital allocation by assessing and managing risks, the industry is well positioned to play a bigger role in the development of sustainable finance.
It is not about exiting sectors because they cause harm to our environment or community; these industries support many jobs that provide for families and sustain economies. It is more about supporting practices that promote sustainable business, employment and growth while being socially responsible.
The mission of providing finance responsibly can be met with predicament though. Banks thrive by financing clients, but they encounter a dilemma of balancing economic gains with environmental and social (E&S) impact when sustainability risks arise from these financing decisions. Banks can also become vulnerable to reputational risk from charges of their clients’ environmentally and socially inappropriate behavior.
Our Environmental and Social Risk Management (ESRM) framework applies standards adopted from the Equator Principles to assess and manage E&S risks in projects.
