Sustainable finance

Sustainable risk management

Environmental and social risk management involves balancing sometimes competing sustainability goals. For example, hydro power is a renewable resource, but its construction can have a significant impact on biodiversity and local livelihoods. Power generated by fossil fuels contributes to climate change, yet it provides a degree of energy security.

Our Environmental and Social Risk policy requires all lending decisions to include consideration of risks such as climate change, including the physical risks it brings from extreme weather and other changes. It also covers the impacts of clients’ activities on biodiversity, deforestation, air and water pollution. This holistic approach to sustainability risk means we are steering our lending towards higher-quality assets.

Our environmental and social due diligence process requires all contentious or high-impact transactions to be reviewed at our Wholesale Banking Responsibility and Reputational Risk Committee. In 2008, we reviewed over 30 prospective transactions before committing financing.

Position statements

Certain key sectors and issues are particularly important because of our financial exposure and their high impact on society and/or the environment. In 2008, we implemented a series of position statements providing guidance on two broad issues (climate change and child labour) and 11 sectors shown below.

Biofuels
Gaming
Ship-breaking

Dams
Mining and metals
Tobacco

Forestry and palm oil
Nuclear power generation
Transport of hazardous materials

Fossil fuel power generation
Oil and gas

These principles are embedded in our lending criteria and included in our core curriculum for lending staff. In summer 2008, we also introduced an employee eLearning module on Sustainable Lending as mandatory learning for all credit officers and relationship managers in Wholesale and SME banking.

The position statements identify the social and environmental standards we expect from the clients we finance. They are accompanied by practitioners’ guides to help our staff apply the principles. The guides provide a checklist of questions covering environmental, social and governance issues, intended to ensure that the client has the management capacity, commitment and track record to meet our expectations. This is now a required step in the credit application process.

The position statements are publicly available on Standard Chartered’s Group Sustainability webpage.
The boxes below summarise our position on two key issues.

Working with clients in the palm oil sector for better environmental and social performance

Sustainable Palm oil

As a member of the Roundtable on Sustainable Palm Oil (RSPO), the Bank expects RSPO membership when evaluating clients in this sector. In the case of one Indonesian palm oil plantation client, we made RSPO membership a prerequisite for lending and this was included as a covenant in our loan agreements. Another client was requested to conduct a High Conservation Value Assessment before beginning new plantings, even before this was made a requirement by RSPO in November 2008.

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Climate change

We commit to considering climate change risks when we make investment or financial decisions, and to work with clients to promote low-emission strategies.

The position statement commits us to encourage clients to:

  • Consider climate change risks and opportunities and integrate them into business development plans where they are material to the client’s business performance
  • Publish their greenhouse gas strategy and emissions and set meaningful targets to reduce emissions
  • Take part in voluntary initiatives for the disclosure and reduction of greenhouse gases, such as the Carbon Disclosure Project
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Forestry and palm oil

We work with clients towards international best practices for sustainability.

We will not support:

  • Logging operations and equipment, and buyers of timber:
    • In primary tropical forest or critical natural habitats
    • In High Conservation Value Forest (HCVF), unless there are appropriate conservation management plans
    • Engaging in illegal operations or affecting recognised endangered species
  • Companies which engage in illegal logging and/or illegal use of fire
  • Conversion of Primary Tropical Moist Forest or HCVF to plantation use

We encourage clients to operate according to the Forest Stewardship Council or equivalent standards, and the principles and criteria of the Roundtable for Sustainable Palm Oil

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Highlights

  • $117mfinance pledged for energy-efficient systems
  • $3.2bnrenewable energy and clean technology projects financed since 2007
  • 13Sector and Issue Position Statements Developed