DBS, OCBC, and UOB have collaborated with the Monetary Authority of Singapore to launch a pioneering report on nature-related financial risks. This initiative, conducted with the University of Cambridge Institute for Sustainability Leadership (CISL), aims to understand how these risks can impact credit risk. The report, titled “Building capacity to identify and assess nature-related financial risks,” is a significant step in raising awareness within the financial sector about these risks.
The study underscores that over half of the global GDP, estimated at USD 58 trillion, depends on nature. However, assessing nature-related risks is complex due to varying regional connections between nature, biodiversity, and people. The report seeks to enhance banks' capabilities in identifying and evaluating such dependencies within their lending portfolios.
The research began in January 2024 and focused on the food and agriculture sector in Southeast Asia, specifically examining the palm oil industry as a case study. Various scenarios like ecosystem degradation and water shortages were analyzed to assess their impacts on palm oil production. Findings indicated that upstream players are more sensitive to these risks compared to integrated players.
Gillian Tan from MAS highlighted the importance of understanding location-specific nature-related risks for businesses and financial institutions. Helge Muenkel from DBS emphasized that natural capital is crucial for economic development and human wellbeing across Asia. Mike Ng from OCBC noted the timeliness of this study given Southeast Asia's vulnerability to biodiversity loss. Eric Lim from UOB discussed the importance of addressing these risks alongside decarbonization efforts.
Dr Nina Seega from CISL praised the collaboration with DBS, OCBC, and UOB as vital for building capacity in understanding climate-nature nexus risks.
This work serves as a template for other financial institutions globally to better understand and address nature-related financial impacts within their portfolios.