SINGAPORE – Banks should review their financing relationships with customers linked to activities contributing to transboundary haze, including limiting their exposure or cutting ties with those found to have clearly breached environmental laws, the Monetary Authority of Singapore (MAS) said.
In a statement on Oct 28, MAS said banks should identify, assess and manage environmental risks arising from their activities and exposures, including risks associated with pollution and deforestation.
Banks should also take into consideration relevant information released by the National Environment Agency under the Transboundary Haze Pollution Act.
“Where customers may be linked to activities contributing to haze, banks should engage them and obtain sufficient information to understand their role and involvement, including whether adequate measures are in place to prevent, detect and stop fires,” MAS said.
MAS added that where heightened environmental risks are identified, banks should take appropriate measures such as imposing conditions, reviewing financing terms and reassessing the client relationship to mitigate the risks.
Clear breaches of environmental laws would warrant stronger measures, including limiting exposures or exiting the relationship, MAS said.
According to research by environmental coalition Forests & Finance, Singapore’s three local banks have provided billions of dollars in historical financing to major palm oil and forestry groups since 2010, including some which were named in recent probes into the sources of transboundary haze.
Data published by Forests & Finance, last updated on Oct 14, identified a combined US$11 billion (S$14 billion) in historical financing attributed to DBS Bank, OCBC Bank and UOB for companies operating in the palm oil and pulp and paper sectors.
OCBC accounted for US$5.91 billion between 2010 and 2026. DBS accounted for US$3.22 billion and UOB US$1.85 billion – both between 2013 and 2026.
Forests & Finance tracks financial institutions providing credit to major companies operating in industries associated with tropical deforestation.
Its database is compiled by identifying major companies operating in the relevant sectors, and tracing their financial relationships through publicly available and other identifiable transaction records, said Merel van der Mark, coordinator of the Forests & Finance Coalition.
While the records are not exhaustive, the research offers a glimpse into the scale of the banks’ financing relationships with major plantation businesses.
The figures, however, do not represent the banks’ current outstanding loans to these companies. The data also does not establish that any financing was used for activities connected to the recent fires and haze.
The three local banks told The Straits Times last week that they could not comment on the figures.
They said they uphold a zero-tolerance policy towards clients engaging in activities such as deforestation and open burning.
OCBC group chief sustainability officer Mike Ng said the bank will take decisive action, including reducing financing support or exiting the relationship, if there is clear evidence of conduct that breaches its sustainability requirements or applicable laws.
The bank said it conducts environmental, social and governance (ESG) risk assessment on clients regularly throughout the financing tenor, such as evaluating their capacity, commitment and track record in managing and mitigating risks they face while conducting their operations.
DBS said that they regularly review compliance with policies governing deforestation as part of their ongoing client engagements and risk assessments.
If the client is unable or unwilling to take steps to adequately mitigate the identified risks, the bank may decline the transaction and reassess the banking relationship further, a DBS spokesperson said.
UOB, too, said that it will take decisive action against client relationships that do not adhere to its responsible financing policy.
MAS said in its Oct 28 statement that it supports the local banks’ clear stance against burning practices and notes that the banks will take strong action where needed.
According to Forest & Finance’s online dashboard, OCBC’s largest recipient was the Fangiono Group, which controls Singapore-listed palm oil producer First Resources.
DBS’s largest recipient was the Salim Group, which controls Singapore-listed Indofood Agri Resources.
UOB’s financing was more evenly distributed among its five largest recipients, including Wilmar International, Provident Agro Group, Harita Group, which controls Singapore-listed Bumitama Agri, Sinar Mas Group, which controls Asia Pulp & Paper and Fangiono Group.
All three banks said they could not comment on specific clients due to confidentiality.
Separately, more detailed records provided by Forests & Finance to ST identified US$300 million in corporate loan financing to First Resources in 2024.
The records attributed US$100 million each to DBS, UOB and a Japanese bank.
First Resources said it is unable to comment.
The oil palm producer was named in a recent Greenpeace report for its link to the haze. It had said on Oct 20 that it welcomed a thorough examination of its operations, and was confident that an objective review would show that it did not clear land using fire, either directly or indirectly.
Alex Helan, senior researcher at Rainforest Action Network, which is part of the Forests & Finance coalition, told ST that banks and investors have considerable influence over how plantation companies manage environmental risks.
Lenders and investors can set conditions on new and existing financing and monitor client performance across their plantation portfolios at scale with satellite data and other forms of due diligence, said Helan.
He noted that financiers should have strict prohibitions on any new development on fire-prone peatlands, regardless of depth. This should be included in financing agreements with any breach considered a default that triggers loan repayment.
Financiers should also strictly prohibit any plantation development on areas that previously burned. This takes away the incentive for companies to expand their plantations through fires, directly or indirectly.
Meanwhile, lenders can offer lower interest rates on sustainability-linked loans when companies meet verified targets such as zero new burn scars, he said.
However, Helan noted that these measures must be supported by stronger regulatory oversight.
Regulators in Indonesia, Singapore and Malaysia can address peat and fire risks explicitly in their guidelines. They could also require banks to disclose their financing to companies that hold peat concessions or have burn scars inside their boundaries, he added.
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