How Asian banks stack up on sustainable finance

High growth and heavy reliance on coal are two features of Asian economies that don’t bode well for a liveable climate. But countries in the region have all set goals for a cleaner, greener future and, as some of the countries most vulnerable to climate change impacts, they have powerful reasons to pivot. The financial sector is a key player in whether or not that pivot will happen.

A new report by Fair Finance Asia, a network of more than 90 Asian-based community organisations, looked at the sustainability agendas of 15 Asian retail banks, all among the largest in terms of assets in the Philippines, Pakistan, Indonesia, Cambodia, and Thailand.

The report, Empowering Consumers as Drivers of Sustainability in Asia’s Financial Sector, rates banks on four metrics: financial inclusion, consumer protection, financial literacy and education, and engagement and accountability mechanisms for bank consumers in understanding and holding them accountable to their sustainability commitments.

Fair Finance Asia asked their selected banks if they have clear sustainability goals, do they disclose the companies and projects they finance (coal operations, for instance), do they provide services and credit to women, microbusinesses and remote customers, do they have consumer protection policies, do they offer green retail products or green investment funds, and do they educate their customers about them?

The bottom line? These banks have a lot of room for improvement. Out of a total possible score of 10, the consolidated scores by country topped out at 5.3 for the Philippines, down to 1.1 for Cambodia. Pakistan, Thailand and Indonesia ranked two, three and four.

The not so bad…

Breaking it down into categories, the banks generally did better on financial inclusion and financial consumer protection — areas that the report notes are regulated by central banks — with an average score of 5.5. They scored less impressively in the areas of accountability and engagement.

For instance, on the assessment of financial inclusion, Banco de Oro of the Philippines scored an impressive 8.9 out of 10, followed by Pakistan’s United Bank Limited and Bank of the Philippine Islands (BPI), both at 8.3.

What that means is that these banks have policies and practices providing access and services to women, “underbanked” or “unbanked” customers and rural and remote areas, low barriers for credit to small- and medium-sized enterprises, and they offer products and services to support for these enterprises in limiting their climate, environmental and social risks.

And the not so good…

But about that category of accountability and engagement… This is the area where banks were scored on their offerings of sustainable products and services, transparency around the composition of sustainable investment funds, disclosure of projects they lend to, engagement with customers on sustainability goals, and responsiveness to their questions and complaints around the topic.

Some of the very big shortcomings highlighted by the report include:

• none of the selected banks disclose information about the companies or projects they finance;
• none of the banks disclose the composition of their sustainable investment funds and only two banks (BPI and Metrobank) provide information on the criteria or methodology used to develop them;
• although 80% of the assessed banks report that they offer sustainable finance products and services, including sustainable home loans, green loans or ESG investment funds, they were not able to explain how their sales staff and/or authorised agents communicate proactively with (actual or potential) consumers about these products;
• only two banks, Cambodia’s ABA Bank and Bank Rakyat Indonesia, have complaints or whistle-blower channels open to clients and external stakeholders that explicitly mention the eligibility of complaints related to environmental or social issues (like human rights violations) arising from their financing or investments.

In accountability and engagement, Bank Rakyat Indonesia had the highest score at 3.2 out of 10. And the average score was an underwhelming 1.3 out of 10.

Look to Europe

Among their recommendations, Fair Finance Asia urged Asia’s financial sector to look to the example set by the EU, which has had a regulatory framework in place since 2018 — the Markets in Financial Instruments Directive.

This, says the report, “incorporates sustainability by requiring financial advisors and portfolio managers to consider clients’ sustainability preferences in investment decisions and by promoting the integration of environmental, social and governance (ESG) factors into financial services”.

Also, as consumers are increasingly expecting transparency and accountability from financial institutions, Fair Finance Asia called on banks to educate and engage with consumers and their clients to empower them to make smart financial decisions that align with their values and enable them to be sustainability partners.

This page was last updated March 12, 2025

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