DBS, OCBC, and UOB have collaborated with the University of Cambridge Institute for Sustainability Leadership (CISL) to release a report aimed at understanding the financial implications of nature-related risks. This initiative is supported by the Monetary Authority of Singapore and represents a significant step in raising awareness within the financial sector about these risks.
The report, titled "Building capacity to identify and assess nature-related financial risks," highlights how over half of the world's GDP, approximately USD 58 trillion, relies on nature. It emphasizes the importance of understanding nature-related risks due to their complex global interconnections.
The study involved analyzing the loan portfolios of DBS, OCBC, and UOB, focusing on the food and agriculture sector in Southeast Asia. The palm oil industry was chosen as a pilot case study due to its susceptibility to climate change. Researchers examined hypothetical scenarios affecting palm oil production, such as ecosystem degradation and water shortages. The findings indicated that upstream players were more sensitive to these risks compared to integrated players.
Gillian Tan from MAS stated: “Nature-related risks are inherently location-specific... This study is a significant contribution to the industry’s understanding of the risks facing a sector that is both economically important in this region and key to global supply chains."
Helge Muenkel from DBS noted: “The health of our natural capital... is intrinsically linked not only to economic development but also to human wellbeing." Mike Ng from OCBC added: “In light of Southeast Asia’s vulnerability... this is a timely pioneering study." Eric Lim from UOB emphasized: “Southeast Asia’s economies and communities are highly dependent on nature and biodiversity."
Dr. Nina Seega from CISL remarked: “We were delighted to collaborate with DBS, OCBC and UOB on this pioneering use case... It is paramount to understand, measure, and manage risks at the climate-nature nexus."
This collaboration aims not only at understanding these risks but also at encouraging other financial institutions globally to conduct similar assessments using this report as a template.