Advancing Sustainability Standards in ESG Financing: Lessons from CIMB Malaysia and Amret's Experience with Global Frameworks

CIMB Group began its transition towards sustainable finance and ESG financing in 2018 when these concepts were not widely discussed in Malaysia. A crucial aspect of their journey involved the development of a two-fold approach to green their loan book and mitigate risks in lending and investments. Initial efforts concentrated on minimizing harm and reducing brown emissions in the loan book, which was achieved by implementing a robust sustainable financing policy. This policy involved an elaborate screening process led by frontline relationship managers and further investigations conducted by the group sustainability team for those that didn’t meet the initial screening criteria. Based on these findings, they could ascertain whether risks were adequately managed and aligned with sector policies. CIMB also established and annually monitored action plans for clients, refusing finance when the risks were deemed too high. This risk management strategy led CIMB to become the first emerging market bank globally to establish a coal policy, with a goal to completely exit coal by 2040 in line with the Paris Agreement goals.

This rigorous process also supported CIMB’s commitment to the United Nations Environment Programme Finance Initiative (UNEP-FI), providing an opportunity to work with 30 other banks to draft the Principles for Responsible Banking (PRB). The supportive network within the UNEP-FI helped address fundamental questions about implementing sustainable finance initiatives.

CIMB faced challenges in committing to the two focus areas stipulated by PRB: climate change and financial inclusion. Given CIMB’s client profile in browner and Agri industries, and a presence in countries with large underbanked populations, these two areas were seen as having the most potential for positive impact. CIMB overcame initial hurdles and made significant progress in addressing climate change, aided by their participation in the Collective Commitment to Climate Action (CCCA) and the NetZero Banking Alliance (NZBA), which committed them to the Paris Agreement’s 1.5-degree goal. The guidelines and resources provided, helped CIMB make advancements in their efforts, despite the strict criteria of the commitments.

To align with UNEP’s framework and the NetZero targets, CIMB set various specific goals related to environmental and social sustainability. They included targets for vendor sustainability, improving gender diversity in management, and implementing sustainability training programs for financial inclusion. Their focus was not just on granting access to finance but also on enhancing financial literacy, securing the future financial well-being of individuals.

To measure performance and goals, CIMB implemented a comprehensive scorecard for each material issue. Despite the challenges posed by climate-related measurements, CIMB made significant progress. They used the Partnership for Carbon Accounting Financials (PCAF) tool to collect data from a wide range of clients, including large corporations, SMEs, and individual mortgages and loans.