UOB, DBS, and OCBC have collaborated with the University of Cambridge Institute for Sustainability Leadership (CISL) to launch a report aimed at understanding the financial implications of nature-related risks. This initiative is supported by the Monetary Authority of Singapore and focuses initially on the food and agriculture sector in Southeast Asia.
The study, titled “Building capacity to identify and assess nature-related financial risks,” began in January 2024 and spans 18 months. It examines how nature-related dependencies can affect credit risk, specifically in the context of corporate lending portfolios. The research highlights areas requiring further exploration to quantify financial risks associated with biodiversity loss, ecosystem degradation, and extreme weather events.
Assistant Managing Director of MAS, Ms Gillian Tan, stated: “Nature-related risks are inherently location-specific, requiring a contextual lens to assess how localised events can translate into material impact for businesses and financial institutions.” She praised the collaboration between DBS, OCBC, and UOB as a significant contribution to understanding these risks.
The report delves into the food and agriculture sector due to its economic significance in Southeast Asia. Within this sector, palm oil production was selected as a pilot case study. Various hypothetical scenarios were examined to assess their impact on production. The findings indicate that upstream players are more sensitive to nature-related risks compared to integrated players.
Helge Muenkel from DBS emphasized the link between natural capital and economic development: “At DBS, we see the preservation and restoration of nature not just as an environmental and social priority but as a risk and business imperative.”
Mike Ng from OCBC highlighted Southeast Asia's vulnerability: “Advancing our understanding of nature-related financial risks will serve us well as we support our clients in their transition.”
Eric Lim from UOB expressed commitment towards addressing these risks: “We seek to understand and address nature-related risks and opportunities including those of our clients.”
Dr Nina Seega from CISL commented on the importance of such collaborations: “It is paramount to understand, measure, and manage risks at the climate-nature nexus.”