Prof Simon Tay, Chairman, Singapore Institute of International Affairs
Mr Nazir Foead, Head, Peat Restoration Agency, Indonesia
Dr Muliaman Hadad, Chairman, Financial Services Authority, Indonesia
Ladies and gentlemen
1 It is my pleasure to be here at the 3rd Singapore Dialogue on Sustainable World Resources.
2 Since its inaugural session in 2014, the Singapore Dialogue on Sustainable World Resources has grown in stature and scale, and played a significant role in bringing together relevant stakeholders to address key environmental and sustainability issues in our region.
3 I am happy to see that many of the participants and speakers are from around the region. All of us want to see our region thrive and do well, and no less Singapore, because a prosperous region benefits us all. One key contributor to economic wellbeing in South-east Asia is a viable and sustainable agro-forestry sector, and there are good prospects for this sector. However, to achieve true prosperity for the people in this region, we all have begun to realise that the agro-forestry sector needs to pursue its economic ambitions in an environmentally sustainable way.
4 Palm oil cultivation, for example, has enabled many local people to improve their lives. It plays a vital role in the global economy, and is used widely in our everyday products that many of us may not even realise.Surpassing other oil crops in terms of yield, it requires less land to produce the same amount of oil, and is a very efficient crop. However, unsustainable land clearing practices, such as the burning of forests and peatlands, risk giving the entire industry a bad reputation, and palm oil consequentially can also be affected. This can threaten the long-term viability of the sector, as consumers and investors increasingly feel compelled to distance themselves from the sector and its products.
5 To do well for the long term, agro-forestry companies need to pursue sustainable growth - growth that takes into account environmental and other important concerns. Let me highlight some practical measures that all agro-forestry companies should implement now, as part of their commitment to sustainable growth.
6 First, agro-forestry companies should take full responsibility for fire prevention and mitigation in their concessions. There must not be a repeat of last year’s fires, because the prolonged season of dryness allowed fires to burn uncontrollably and in a very widespread way. Second, companies should invest in efforts to rehabilitate degraded and fire-prone peatlands. We laud the appointment of Pak Nazir Foead by the government of Indonesia to look at the rehabilitation of peatlands in Indonesia. We cannot afford to have massive releases of carbon that negate global efforts to combat climate change as what happened last year. Third, companies must ensure that sustainable policies and practices don’t stop with them, but are implemented throughout their supply chain. Just last week, Unilever, Mars and Kellogg cancelled their contracts with a major palm oil producer following a suspension of the company’s certification by the Roundtable on Sustainable Palm Oil (RSPO) over deforestation practices. The government lauds the efforts of these companies in taking proactive steps to incorporate environmental sustainability into their entire supply chains and operations.
7 What measures can we take to prevent the recurrence of last year’s fires? I have highlighted in my Committee of Supply speech on Tuesday that it requires a multi-faceted approach from all stakeholders. Let me reiterate the key points of my speech.
8 First, we have to actively promote regional cooperation because haze is a multilateral issue. Second, we will continue to support Indonesia’s efforts to tackle the haze. And therefore, Pak Jokowi’s announcement yesterday to have a moratorium on new concessions for palm oil plantations and land for mining, is certainly laudable. Third, as consumers, each one of us can influence the agro-forestry industry through our purchasing decisions.
9 Fourth, I would like to emphasise that the government is sparing no efforts to address the commercial roots of transboundary haze by pursuing errant companies under the Transboundary Haze Pollution Act (THPA). NEA recently served Notices under Sections 10 and 11 of the THPA on a foreign Director when he was in Singapore. These Notices require him to provide information relevant to the haze and attend an interview in relation to the ongoing investigations. In accordance with the law, we will take every necessary step to enforce the THPA, bearing in mind that outside of Singapore, there are limited possibilities. We will of course, hold any Singapore-linked persons or entities to account. At the same time, even if the errant company’s officers are foreigners, they will have to comply with the laws of the country, including the notices under the THPA, should they come to Singapore.
10 The THPA has also given us the tools to be effective in getting companies to take notice and take actions. I note that some prominent agro-forestry companies have frantically taken out advertisements and gone on talk shows to show that they are doing something. This goes to show that companies like these have sat up and taken notice of our actions through the THPA. My message to all these companies is simply this – companies practising unsustainable production that affect us with haze must know that their actions will not lead to profitability and that they will have to face the consequences sooner or later.
11 Let me now touch on how civil society can play its role in promoting a sustainable agro-forestry sector.
12 First and foremost, civil society is a key enabler to foster an informed consumer movement and strengthen support for sustainably-sourced products. Second, civil society plays a critical role in enhancing the transparency and accountability of companies and their supply chains, thereby enabling consumers and investors to give greater support to sustainable businesses.
13 As consumers, we have choices, and we should make our choices count.When the haze hit Singapore last year, there was a noticeable ground-up movement, the likes of which we had not seen before. This effort was led by civic organisations and responsible businesses. As mentioned by its Chairman Isabella Loh, the Singapore Environment Council (SEC) instituted a temporary restriction on the use of the Green Label by Asia Pulp and Paper (APP) in October last year, and together with the Consumers Association of Singapore (CASE), jointly led a movement to advocate against unsustainable practices. Consequently, large supermarket chains such as NTUC FairPrice, Sheng Siong and Prime Supermarket responded by removing all APP products from their shelves, while the Dairy Farm Group stopped the purchase of all APP products. Organisations such as the World Wildlife Fund (WWF)-Singapore, People’s Movement to Stop Haze (PM.Haze) and the Singapore Institute of International Affairs also jointly organised the “We Breathe What We Buy” campaign to increase public awareness on the sustainability of agroforestry products.These actions demonstrate the significant power of a collective consumer voice, and an increasingly active and empowered consumer movement, led by civil society.
14 Recently, a report by an Indonesian activist group “Eyes on the Forest” highlighted that while companies have made commitments to stop deforestation, their supply chains remain tainted with palm oil grown on protected lands with fragile ecosystems, that are home to the endangered Sumatran tigers, elephants and Orang Utans. This demonstrates the crucial role that civil society plays in bringing malpractices to light, and enhancing the transparency of supply chains and accountability of companies in the palm oil and forestry sectors.
15 One such area relates to the transparency of information on concessions and hotspots. Where progress on ASEAN efforts such as the Regional Haze Monitoring System has been slow, NGOs have been quick to find a solution to this.
16 The Global Forest Watch, spearheaded by the World Resources Institute has helped to improve the transparency of forest management and commodity production through its tie-up with the Roundtable on Sustainable Palm Oil (RSPO) on maps of certified sustainable palm oil production sites. More recently, Greenpeace Indonesia launched a public GIS portal – “Peta Kepo Hutan” which overlays concession information from various official sources, allowing tracking of fires on different concession types, from palm oil, to logging, wood fibre and mining concessions. A useful feature is that “Peta Kepo Hutan” now allows the identification of companies that own such concessions.
17 Another area relates to eco-certification, which enables consumers to readily identify sustainably-sourced products. Last year, the RSPO announced RSPO Next, a voluntary addendum to its existing principles and criteria for certification. It is an initiative to encourage RSPO member companies that have met the current requirements of the RSPO, to exceed these requirements. This is a good initiative and I hope companies will respond positively.
18 Nevertheless, I would not want to paint an overly optimistic picture. Currently, only 21% of global palm oil is currently certified by RSPO, and there is a lot more work required to increase demand for sustainable palm oil, as well as for the certification of supply chains.Hence, I am glad that the SEC has recently launched a new category under the Singapore Green Label Scheme for products containing palm oil that builds on the RSPO certification.
19 I am also happy to note the significant progress made in the area of pulp and paper products.In October last year, SEC and CASE stepped up their engagement efforts by getting leading supermarkets, pharmacies, furniture retailers with paper products certified under the Singapore Green Labelling Scheme (SGLS) administered by the SEC to declare that they had not procured or used wood, paper or pulp materials from unsustainable sources.As part of its continuous efforts to help the public identify environmentally-friendly products and enhance eco-consumerism, SEC has just announced that it is now taking it further and working on a new category for products with pulp and paper which will include in its criteria the requirement for peatland management and fire prevention standards. When fully developed, I believe this standard will be the most holistic certification standard for pulp and paper in the world. It will be a tool that empowers consumers to make a very safe non-haze pro-conservation choice for sustainable paper products. This will not only be very good for Singapore but can also set the standard for global consumers. I commend SEC for taking this bold initiative.
20 I also strongly encourage companies which have not participated in the SGLS to be part of the certification. And as consumers, we should now start buying and using products from companies that have pledged to be socially responsible. The Singapore Government will also do its part as a major consumer.From the third quarter of 2016, the Government will only procure printing paper products that carry the Singapore Green Label. We will also spearhead efforts in fighting climate change by procuring electrical products that have been certified as being highly energy efficient, starting with four of the most commonly procured electrical items, air-conditioners, lighting, televisions and refrigerators. Through our efforts, we hope to spur individuals and businesses to likewise make a deliberate choice to support environmental sustainability.
21 My final point is on the pivotal role that the financial sector plays in advancing and raising the bar on sustainable financing and investment practices.
22 There is growing recognition that adopting environmental, social and corporate governance (ESG) practices positively affect long-term, risk adjusted returns, and high ESG ratings, more often than not, correlates with a lower cost of capital. It is a sustainable way to run businesses, and a hedge against reputational and environmental risks.Banks and investment institutions will therefore be promoting their clients’ interests by encouraging the wider adoption of ESG practices.
23 At the height of the haze episode last year, the Association of Banks in Singapore (ABS) issued its Guidelines on Responsible Financing. Specifically, banks in Singapore are required to disclose their commitment to responsible financing, publish their policy framework, and implement governance systems by 2017. The three local banks – DBS, OCBC and UOB – have issued commitments to responsible financing in their respective annual reports released recently. The ABS is also actively engaging the industry to raise awareness and build capacity on sustainable financing. Early this month, the ABS and WWF conducted capacity building workshops to prepare the industry for the implementation of the ABS’ guidelines.
24 On the capital markets front, SGX will be introducing sustainability reporting on a “comply or explain” basis, and had in February this year concluded its public consultation on the proposed rules and guidelines.SGX expects the new rules and guide on sustainability reporting to apply to companies from the financial year ending on or after 31 December 2017, with reports published from 2018.
25 These are positive steps, and I encourage our financial sector to take even bolder measures to support sustainability, in line with international best practices.
26 Internationally, there are encouraging signs that major international investors are distancing themselves from unsustainable business practices. For example, Norway's Government Pension Fund Global (GPFG), the world's largest sovereign wealth fund, recently dropped 11 companies because of connections to deforestation.
27 There are also efforts underway by international bodies. The United Nations Environment Programme launched its final report on its Inquiry into the Design of a Sustainable Financial System last October. The report discussed how the full potential of the financial system can be harnessed, and policy options that could mobilize capital to sustainable development, and towards a green and inclusive economy. Second, the Financial Stability Board (FSB) has announced the launch of an industry led Task Force on climate-related financial risk disclosures, chaired by Michael Bloomberg. The Task Force will develop voluntary, consistent climate-related financial risk disclosures for use by companies. Singapore Exchange’s Yeo Lian Sim is the Vice Chair of this task force, which held its second meeting last month in Singapore. The task force is currently working on developing specific recommendations in consultation with key stakeholders and will deliver to the FSB its report by December 2016.
28 With China holding the G20 Presidency this year, it has made green financing a core part of its agenda. China has set up the Green Finance Study Group (“GFSG”), which countries like Singapore and Switzerland are part of. Germany has also agreed to carry the theme of green finance on the G20 agenda through to their Presidency in 2017.
29 Banks and central banking authorities in the region have also progressed. In November 2015, Otoritas Jasa Keuangan (OJK), the central bank of Indonesia, released its Sustainable Finance Roadmap, covering areas such as micro-finance, capital markets, SME lending, pension funds and insurance. The sustainable finance roadmap comes with time frames and deliverables driven by market-based incentives. OJK had also announced its collaboration with the WWF to launch an 18-month project to help Indonesian banks integrate ESG criteria in its credit approval framework. Just last month, Bank Mandiri, Indonesia’s largest bank, announced that it will tighten credit loans to oil palm plantations, and new loans to finance development of new oil palm plantations in peat lands will be ceased.
30 These efforts are testament to the commitment of international, regional bodies and our domestic financial institutions in promoting the cause of sustainability. Our financial institutions can and should continue to exercise influence over forestry and palm oil companies, and promote the adoption of sustainable practices by factoring sustainability issues into their lending and investment activities.
31 To bring about a more sustainable agro-forestry sector, we will need all stakeholders – consumers, investors and lenders and businesses themselves to move ahead together.We cannot expect transformational changes overnight. Together, the different actors within the ecosystem must collectively step up efforts, even as we know that challenges abound. The government has taken a stand, and we hope to have you along with us on this journey towards sustainability. Let us all work together towards clear skies and clean air for all, now and into the future.
32 In closing, I would like to congratulate SIIA for organising this event. SIIA has also been active on the haze front, through its diplomacy and networking efforts, and the regular commentaries on haze that it publishes.
33 Thank you all, and I wish you a lively, constructive discussion ahead.