CIMB Bank: Driving ESG Progress in ASEAN

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00:00I can be heard. So welcome to the Bloomberg ASEAN Investment Summit. We are of course having this

00:14sustainability breakfast or round table where you will hear you know panelists share some

00:22perspectives around the state of things in ASEAN and I'm going to just take a couple of minutes

00:27to maybe set the stage before the panel kicks off. So you know it's been an interesting year to say the

00:35least. So I always like to reflect on is the glass half full or half empty right. So if you think of

00:43the half empty perspective there is obviously headwinds that we are facing. So if you think

00:51about export risks ASEAN is obviously collectively big trading nations and so for example if you look

01:00at approximately 10% of our exports in ASEAN go to the EU and we know that there are regulations

01:07that have kicked in and will continue to ramp up and that could put some risk to ASEAN's

01:14competitiveness in the years ahead if we don't act. And you know going a little bit more specific

01:21into a key export of Malaysia and Indonesia if you look at palm oil for example linked to the EUDR

01:27regulation there is also risk there and that's approximately about 6 billion in annual exports.

01:35On the energy side we are having you know good economic growth in large parts of ASEAN

01:41and energy is expected to grow about close to 20% in terms of annual consumption from today

01:49to 2030. Unfortunately more than 80% of our energy production in ASEAN is still fossil fuel linked

01:59and so that would pose you know a certain degree of challenges as many of the ASEAN countries have

02:06also committed to various pathways on towards net zero. So if we don't decarbonize our factories, trace

02:13our commodities and green our logistics ASEAN's comparative advantage could turn into a trade disadvantage.

02:22So that's the sort of slightly negative side of things, the half empty argument. On the half full side

02:30you know there is obviously a lot of things that we should be pleased about being in this part of the world.

02:35For example in Malaysia we are blessed with still pretty high forest cover so you know if you go to recent data

02:46anything above 70% of our carbon emissions are fully absorbed by the natural cover that we have so that's positive.

02:56And Malaysia and Indonesia hold over 18% of global nature-based carbon potential.

03:05ASEAN as a region accounts for the significant share of global nature-based solution market.

03:11This positions us as key players in the nature-based solutions with substantial opportunities for carbon

03:17markets and biodiversity projects. So earlier I talked a little bit about you know the the state of play

03:24where we still generate our power largely with fossil fuel but the good news is that most countries in

03:32the region have commitments to decarbonizing the grid so we have a target of doubling that in terms of

03:41sourcing from renewable sources so that's targeted to get to about 45% by 2030 led by you know countries such as

03:50Malaysia, Indonesia, Thailand, Vietnam etc. So there is good momentum out there.

03:58So ASEAN has significant potential to grow the investments in this green sector. Today collectively ASEAN

04:06spends about 1% of our GDP in the green sector. China spends about 4% of its GDP and I guess we've all heard and

04:17seen various stories about how quickly you know the transition is happening there if you just look at

04:22mobility etc etc. So governments are acting too. Singapore, Indonesia, Malaysia and Thailand have

04:29committed towards the ASEAN carbon credit framework to link regional carbon markets. Efforts to introduce

04:36carbon pricing or tax are being implemented as well and the private sector is stepping up too. Banks,

04:42investors and corporates are channeling billions into green infrastructure, sustainable bonds and nature

04:49positive projects. So yes the challenge is real. It's not a straight line you know if you think of the

04:56momentum many of us and the speakers will obviously share their perspectives. We've started this journey

05:03many years ago thinking that you know everyone will be exactly on the same pathway and you know move

05:08move at pace and the reality is it's not a perfect straight line. We do face some challenges so really

05:15the question isn't whether ASEAN can lead but how fast we can act together to turn our strengths into

05:21our greatest advantage. So maybe just a couple of minutes on CIMB. So obviously we have stepped up

05:32so about five years ago we went in a very focused manner to develop our sustainability posture and agenda.

05:40We have since committed 300 billion to mobilize sustainable finance across leading up to 2030.

05:48I'm pleased to say that you know at various checkpoints we've had we started obviously with lower targets

05:54and at various checkpoints we had raised that bar and that's really credit to you know the ecosystem

06:01around us whether it's the regulators, whether it's the companies, etc. that you know there is clear

06:08momentum and interest to drive this. So how do we effect you know change and how do we work with clients?

06:16It's really around the three things that you see on the screen. So one is really green and social finance.

06:21So this is where the use of proceeds that we deploy with our clients has a clear focus on green or

06:30transitioning etc. So for example we are an active financier in the EV ecosystem in Indonesia. In Malaysia

06:38we've worked on some of the rail and electrified rail networks and and that's all a part of the the journey

06:47towards driving or deploying capital to where it matters. In the second bucket in terms of what we

06:56call sustainability linked loans. So this is where we link metrics that the clients commit to to in order

07:05to translate to better terms on our financing. So for example we have deployed over a billion ringgit to a

07:13large plantation company in Malaysia where we have worked on reducing carbon intensity by 50% and also

07:23increase traceability by over 200% in terms of the fresh fruit bunch. And finally on advisory. So this is

07:35interesting because if you think about it you know the larger companies obviously have good sustainability

07:40teams and units and chief sustainability officers but as you work down the size of companies and you

07:46get into the SME sectors that tends to get a lot more challenging. So we came up with a product called

07:53Green Biz Ready where we work with SMEs to essentially handhold them through this journey. And so you know as

08:00I mentioned earlier a little bit around the export network and risk. So for example one particular SME

08:07we worked with SME we worked with them to essentially show the pathway to reduce their intensity by 43%

08:14their scope to levels by 43% and so working with us through our financing they then established that

08:22and that allows them the ability to provide proof and and respond to their buyers within the MNC ecosystem

08:30globally so that they can then sustain their competitiveness and also grow market opportunities.

08:37So you know in conclusion we feel that you know as I mentioned the journey is not one of a straight path.

08:47There are many things that we will need to do so in facilitating the business side that I mentioned we also of course watch our portfolio.

08:57So we are the first bank to essentially release sector decarbonisation pathways for our six highest

09:05highest emitting sectors which contribute about 60% of our finance emissions so that's well underway it's

09:12being tracked and we are certainly deploying additional amounts of financing to greener opportunities etc.

09:21So we look forward to working with all our clients solution partners regulators to keep this agenda firmly in

09:28place and make progress such that Malaysia and ASEAN grow its resiliency and attractiveness as a future proof

09:36destination for businesses and our global trade partners. So thank you very much and over to the panel.

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