ABS launches industry standard template for banks to engage corporate clients on environmental risk issues
28 June 2022
On 21 April 2022, the Association of Banks in Singapore (“ABS”) launched the ABS Environmental Risk Questionnaire (“ERQ”). The ERQ is the first industry standard template that sets a consistent baseline for banks in Singapore to engage their corporate clients on environmental risk issues, gather data points, and identify opportunities to finance the transition to a low-carbon economy.
The ERQ is one of the key deliverables of the Green Finance Industry Taskforce (“GFIT”) workstream on risk management to help the industry in embedding the Environmental Risk Management Guidelines published by the Monetary Authority of Singapore.
The ERQ is designed to help establish a best practice for banks in Singapore to engage their clients in assessing and mitigating their environmental risks. At the outset, the ERQ will apply to the following high-risk sectors, as identified by GFIT:
- agriculture and forestry/land use;
- construction/real estate;
- transport and fuel;
- energy, including upstream; and
Banks are recommended to apply the questionnaire to customers with which they have a credit exposure of US$10 million and above, although banks may adjust this threshold according to their own environmental risk materiality assessment.
The questions are divided into four sections referencing the Environmental Risk Management Guidelines:
- Risks: This section is aimed at understanding environmental risk aspects of the customer, including the magnitude and impact of physical, transition, reputational and biodiversity risks, and the measures undertaken to address the impact of such risks.
- Governance: This section focuses on understanding the internal governance process, strategy and policies of the customer to manage environmental risks. It further explores the reporting standards adopted, such as by the Task Force on Climate-related Financial Disclosures (TCFD), and other external requirements.
- Metrics: The section is primarily aimed at understanding whether customers have developed measures and targets for managing environmental risks. A key focus is whether greenhouse gas emissions data has been quantified and disclosed by customers.
- Sustainable financing: This section supports the identification and assessment of sustainable financing opportunities by including questions pertinent to the customer’s sustainable financing strategy and framework. This section also explores the financing requirements of customers.
The following materials are available on the ABS website www.abs.org.sg: