Sustainable finance development key to unlocking ASEAN's potential: MUFG Chief

Stocks News Friday December 2, 2022 14:35 —PRESS RELEASE LOCAL

Sustainable finance development key to unlocking ASEAN's potential: MUFG Chief

As climate change and net zero targets become a daily topic of conversation among the board members of a vast array of businesses, its incumbent upon banks to create innovative financial products to not only meet but also drive the development of sustainable business practices, according to Hironori Kamezawa, President & Group CEO of Mitsubishi UFJ Financial Group.

Speaking at the APEC CEO Summit 2022 in Bangkok, Mr. Kamezawa stated that banks have an essential role in realizing a sustainable economy as they can act as an intermediary that allocates capital to target sectors as they transit from Brown to Green businesses.

"Sustainability has become an irreversible global megatrend. Nowadays, when I speak with business leaders, sustainability is the key element of their transforming business strategy, regardless of the type of industry. In turn, this makes enabling a wide range of industries to achieve their sustainable goal an essential mission for financial institutions," said Mr. Kamezawa

"Banks need to transform themselves to operate sustainably, and this means there needs to be a collaboration between banks and customers in order to learn and motivate each other and then move forward together."

In today's world, the meaning of sustainability goes beyond environmental issues since there is also a social and economic impact for every business action. As a result, this broadens the focus on financial institutions as they need to consider everything from Carbon Neutrality to Financial Inclusion.

One example of the work MUFG is doing through its four partner banks in ASEAN - Thailand's Krungsri Bank, Bank Danamon in Indonesia, VietinBank in Vietnam, and Security Bank in the Philippines - is Sustainability-Linked finance, where borrowers set ambitious KPI targets relevant to their core business. Loan terms, such as interest rates, change depending on KPI achievement, incentivizing customers to reach their ambitious KPI targets and realize sustainable business.

Krungsri is a leader in this field and has provided several major companies with this kind of finance in Thailand and Southeast Asia. Krungsri held the No.1 position in ESG (Environmental, Social, and Governance) Underwriting Market Share in Thailand last year.

Digitalization and financial inclusion also play crucial roles in providing next-generation financial services in Southeast Asia. In Thailand in 2020, MUFG and Krungsri entered a strategic alliance with Grab, the leading super-app in Southeast Asia, to provide small loans to drivers and food merchants. By combining Grab's dynamic data and AI-powered technology with Krungsri's expertise in consumer finance and risk management, it's possible to go from applying for a loan to receiving the funds in just a few taps and support the cash-flow needs of these drivers and merchants.

As one of the G-SIFs (Global Systemically Important Financial Institutions), MUFG has been at the forefront of sustainable finance and made its "Carbon Neutrality Declaration" in 2021, intending to achieve net zero emissions in its operations by 2030 and finance portfolio by 2050.

MUFG has also played a leading role in global initiatives such as the Net-Zero Banking Alliance (NZBA) and the Asia Transition Finance Study Group (ATFSG). The NZBA is an industry-led alliance of global banks committed to aligning their lending and investment portfolios with net-zero emissions by 2050. In ATFSG, MUFG takes a leading role together with global banks and rulemaking organizations to create practical transition finance guidelines for financial institutions.

"There are several steps to how banks can help realise customers' sustainability goals. Firstly, we believe it is essential to focus on establishing customer engagement to achieve carbon neutrality. Secondly, through talking to customers we can understand their roadmap and its challenges, then help them to achieve their sustainability goals. And finally, we provide sustainable finance solutions to support customers' goals. By embracing sustainability, there are opportunities for businesses across ASEAN to realise their potential while creating a better world for us to live in, and MUFG is here to support them on their journey," added Mr. Kamezawa.

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