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Global Consensus, Regional Actions: Recommitting to Sustainable Growth CONFERENCE HIGHLIGHTS Friday, 15 April 2016 • The Ritz-Carlton, Millenia

3RDRD SINGAPOREIINNNGGAGAPPOPORPOREOREORE DIALOGUEIIAAALLOLOGUE ONN SustainableSSuussttaiinanablble WWoWorldorrlld RReResourceSessoouurrcceeS KEYNOTE SPEAKER: Mr Masagos Zulkifli Bin Masagos Mohamad Global Consensus, Regionali l AcƟons: Minister for the Environment and Water Resources, Singapore Recommiƫng to Sustainable Growth PANEL KEYNOTES: Mr Nazir Foead The case for sustainable business is now clearer than ever. Le Head, Peatland Restoraon Agency, unchecked, the exploitaon of resources will have profoundly Dr Muliaman Hadad negave impacts on the environment and vulnerable communies Chairman, Financial Services Authority (OJK), Indonesia across ASEAN. PANELLISTS: Mr Bian Zhenhu In 2015, the Paris climate conference saw 195 countries adopng President, Chamber of Commerce for Import the first-ever universal, legally binding global climate deal. At the & Export of Foodstuffs, Nave Produce and Animal By-Products same me, ASEAN countries experienced one of the worst Professor Wang Yao transboundary haze episodes since 1997. Forest and peat fires Deputy Secretary General, across Indonesia led to months of smoke haze and affected at least China Green Finance Commiee, China Finance Society six of the ten ASEAN countries, extending even to southern Dato’ Dr Makhdzir Bin Mardan and . Oil palm and pulp and paper companies, together Chief Execuve, Malaysian Palm Oil Associaon with their financiers, smallholder farmers, office-holders, and Mr Anderson Tanoto law-enforcers, were placed squarely in the spotlight. Director, Royal Golden Eagle Dr Petra Meekers With growing global consensus on climate change acon, it is all the Director of CSR and Sustainable Development, more urgent that industry, regulators, and policymakers Musim Mas Holdings consolidate the lessons learnt and best pracces for sustainable Mr Thirawit Leetavorn resource management. Senior Execuve Vice President, Double A (1991) Public Company Limited As a leading, independent and not-for-profit think tank, the Ms Judy Hsu Singapore Instute of Internaonal Affairs (SIIA) is a recognised Singapore Chief Execuve Officer, Standard Chartered Bank thought leader on various topics including the haze and resource Mr Hervé Simon sustainability in the ASEAN region. Group Markeng Director, Ayam Brand Mr Stephan Lynen On 15 April 2016, the SIIA hosted the Third Singapore Dialogue on Head of Region (Asia Pacific), Industrial & Consumer Speciales, Clariant (Singapore) Sustainable World Resources (SDSWR) at The Ritz-Carlton Millenia Singapore, bringing together over 300 policymakers, corporate Mr Irwan Gunawan players, acvists, academics, and journalists. The Dialogue Deputy Director, WWF Indonesia addressed quesons such as: Ms Isabella Loh Chairman, Singapore Environment Council How can we reconcile different stakeholders and their compeng Mr Hendry Predy Yang Palm Oil Coordinator (South & South East Asia), land uses? What are some best pracces for increasing sustainable Solidaridad Network farming pracces among smallholders? How can we increase Mr Hj. Narno demand for eco-labelled products among consumers? What can Group Manager, Amanah Associaon ASEAN’s financial regulators glean from the experiences of China and Indonesia? MODERATORS: Associate Professor Simon Tay This report aims to capture the key messages from the Dialogue. We Chairman, Singapore Instute of Internaonal Affairs would also like to thank our key sponsors Double A (1991) Public Mr Nicholas Fang Company Limited and Musim Mas Holdings; our partners Cargill Execuve Director, Singapore Instute of Internaonal Affairs Tropical Palm and Temasek Holdings; supporng organisaon IE Ms Lee Chen Chen Director, Policy Programs, Singapore; and official broadcaster Channel NewsAsia. Singapore Instute of Internaonal Affairs

Third Singapore Dialogue on Sustainable World Resources 1 PANEL 1 Sustainable Land Use: What Governments and Companies Can Do

Sustainable land use: What Governments AND Companies CAN DO

For almost two decades, transboundary tends to be favoured for its lower cost and haze polluon from Indonesia’s forest fires higher efficiency as opposed to mechanical has affected its ASEAN neighbours, means. These fires – especially fires on dry especially and Singapore. 2015 peatland – oen give rise to smoke haze. witnessed one of the worst haze crises on record, as some 2.6 million hectares of Indonesia recognises the importance of a forest and farmland in Indonesia were producve yet sustainable landscape. It has burned from June to October. At least six of commied to reduce its greenhouse gas the ten ASEAN countries were affected, emissions by 2020, increase the protecon including Thailand and Vietnam. of land and forests from fires and illegal logging, and restore and protect peatland. Transboundary haze polluon carries The Indonesian government now substanal costs. The World Bank, for acknowledges that solving the issue of fires instance, placed the cost to Indonesia at necessitates shiing focus from suppression about US$16.1 billion, or 1.9% of its to prevenon, which is both cheaper and predicted 2015 Gross Domesc Product more effecve. (GDP). Daily carbon emissions from Indonesia’s fires also exceeded those from At the Paris climate conference (COP21) in the US on 26 days from September to December 2015, Indonesian President Joko October 2015. The economic cost to Widodo (Jokowi) announced plans to Singapore stands at about US$515.3 million establish a Peatland Restoraon Agency (S$700 million). Yet, haze polluon is merely (BRG) which was later formalised in January a reflecon of a deeper and ongoing 2016. In his first overseas address, Mr Nazir problem: the unsustainable management of Foead, Head of BRG, outlined the agency’s resources, parcularly with regards to land plans to restore peatlands damaged by and labour relaons. forest fires. His insights drew significant media aenon and coverage, including In Indonesia, land is oen cleared using fire, The Straits Times and Channel NewsAsia. known as the ‘slash-and-burn’ method, to make way for culvaon. While the use of fires to clear land is naonally outlawed, it

2 Third Singapore Dialogue on Sustainable World Resources I cannot emphasise more how seriously Indonesia is preparing acons to prevent fires from happening…We put a lot of effort and budget into migaon of the fires, but too lile in prevenon. This is changed now.

MR NAZIR FOEAD Head, Peatland Restoraon Agency, Indonesia

At the same me, Singapore is commied to aims to share informaon, best pracces on fire addressing the “commercial roots of transboundary migaon intervenons, and potenally resources to haze” by pursuing errant companies under the address Indonesia’s persistent fires and haze. Transboundary Haze Polluon Act (THPA), said Mr Masagos Zulkifli, Singapore’s Minister for the Even as local communies are roped in to help Environment and Water Resources. The Act prevent fires, it is also vital to resolve social conflicts aributes liability to enes that conduct or condone arising from unclear land ownership and an act which causes or contributes to haze polluon responsibility. One soluon is to rezone the conflict in Singapore. Malaysia is also considering to enact a areas, said Mr Foead. By establishing clear land similar law on the haze. rights, the local people will have an incenve to protect the land while making producve use of the Some companies are also shiing their emphasis to land to plant crops. fire prevenon. For instance, Asia Pacific Resources Internaonal Holdings Limited (APRIL), Royal Golden Some companies have also integrated small-scale Eagle (RGE)’s pulp and paper company, has launched farmers into their supply chains. In fact, smallholders the Fire-Free Village Programme, which seeks to account for almost 40% of Asian Agri’s total palm oil prevent fires by focusing on community engagement. producon. Asian Agri is part of a group of companies Aer successfully reducing the amount of burned managed by RGE, which works with one of the largest areas in its pilot project, the programme expanded to smallholder groups in both its palm oil and its pulp cover more villages. Based on the lessons learned and paper businesses. The company believes in from implemenng the Fire-Free Village Programme, collaborang with its farmers to socialise its APRIL also formed a Fire-Free Alliance (FFA) in early sustainability policies and works closely with them on 2016. FFA is a voluntary mul-stakeholder group that implementaon.

Third Singapore Dialogue on Sustainable World Resources 3 PANEL 1 Sustainable Land Use: What Governments and Companies Can Do

Moreover, companies such as Double A (1991) Public Company Limited demonstrate that alternave methods of growing crops, other than on plantaons, can prove financially successful and environmentally sustainable. The Thai pulp and paper company works with farmers to grow trees along the edges of their rice paddies, providing them with an addional source of income. It is also engaging villages to grow trees on their unused land, with villagers having the freedom to decide how to use the funds MR ANDERSON TANOTO generated. These two programmes provide about 30% to 50% of Director, Double A’s wood sourcing. The rest of its sourcing is derived from Royal Golden Eagle reserved plantaon areas.

The crux of the problem is Sll, these iniaves are not good enough without cerficaons as prevenon. Prevenon is about part of being a sustainable company, said Mr Thirawit Leetavorn, engaging the community. When you change the conversaon from Senior Execuve Vice President of Double A (1991) Public Company suppression to prevenon, you’re going Limited. Cerficaons help to ensure that a company’s pracces to see huge impact on the ground. meet acceptable standards. Double A (1991) Public Company Limited is working with the Singapore Green Labelling Scheme, the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Cerficaon (PEFC). It is also pushing forward the naonal standards of sustainably sourced wood in Thailand, in partnership with PEFC.

While challenges on the ground remain, the sustainable use of land and resources can be realised with the leadership of the government and support from various stakeholders including

MR THIRAWIT LEETAVORN companies, non-governmental organisaons, and local communies. As Mr Anderson Tanoto, Director of Royal Golden Senior Execuve Vice President, Eagle observed, “If we fail to put people at the heart of everything Double A (1991) Public Company Limited we do, it will never be sustainable.” We don’t want farmers to be displaced from the land. We’d rather that they stay on the land, connue growing rice, and help us grow our trees.

4 Third Singapore Dialogue on Sustainable World Resources Greening the Palm Oil Supply Chain: Progress and Challenges PANEL 2

Greening the Palm Oil Supply Chain: Progress and Challenges

The oil palm plantaon and processing However, the development and expansion industry has been a key contributor to the of palm oil plantaons have been met with economies of Indonesia and Malaysia. Both cricism, in part due to the associated countries collecvely account for deforestaon and degradaon of approximately 85 to 90% of total global carbon-rich peatlands. In some cases, palm oil producon, while Indonesia is the burning is used to clear land, possibly largest palm oil producer and exporter leading to uncontrolled fires and smoke worldwide. haze. These unsustainable pracces could give rise to reputaonal damage and pose a Palm oil is used in a wide variety of food, threat to the industry’s long-term viability. cosmec and hygiene products, and an expanding global populaon is likely to give rise to even higher global palm oil demand in the future. Therefore, the lucrave palm oil industry will likely connue to be aracve and instrumental in generang employment opportunies.

Third Singapore Dialogue on Sustainable World Resources 5 Unsustainable land clearing pracces…risk giving the enre (palm oil) industry, and even palm oil itself, a bad name. 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.

MR MASAGOS ZULKIFLI BIN MASAGOS MOHAMAD Minister for the Environment and Water Resources, Singapore

Even as companies and other stakeholders begin Nonetheless, the recent haze crisis has “struck a to understand the need to place more emphasis chord of awareness” in the region, highlighng on environmental and social concerns to succeed the importance of sustainability and the urgency in the long-term, there connues to be a lack of to act. Considering that 91% of global oil palm understanding of what sustainability across the growers are located in Malaysia, Indonesia and supply chain entails. The nuances in Thailand, it is necessary for these countries to understanding are shaped by the different work together to formulate a sustainable growth experiences of the stakeholders, and this is not strategy for the industry as a whole. easy to manage, said Dato’ Dr Makhdzir bin Mardan, Chief Execuve of the Malaysian Palm Oil Associaon.

6 Third Singapore Dialogue on Sustainable World Resources Greening the Palm Oil Supply Chain: Progress and Challenges PANEL 2

Mul-stakeholder iniaves such as the Roundtable on Sustainable Palm Oil (RSPO) are useful plaorms to unite different pares in the industry in driving sustainability. As one of the first Indonesian companies to join the RSPO, Musim Mas embarked on their sustainability journey more than 10 years ago, undergoing cerficaons and looking at ways to integrate different players in their supply chain. The company is now involved in establishing full traceability back to their mills, and, following that, to their DATO’ DR MAKHDZIR plantaons. BIN MARDAN Chief Execuve, Despite Musim Mas’ long-standing commitment, challenges Malaysian Palm Oil Associaon remain. For instance, the company has seen mixed responses when It is very important that everybody engaging with different players on its sustainability policies and (Malaysia, Indonesia, and Thailand) sit pracces. One soluon is to idenfy local plaorms to facilitate at the table…and then come up with dialogue between mulple pares, rather than connuously the commonality that we can do engaging on a one-to-one basis. These dialogues, which aempt to something with. connect all the stakeholders that are involved in a parcular area, are part of what has become known as the “landscape approach” to sustainable forestry.

Besides large palm oil companies such as Musim Mas, small- and medium-sized companies are also demonstrang their commitment to sustainability. Ayam Brand, one of the oldest brands of consumer canned products in Asia, is a user of cerfied sustainable palm oil (CSPO). The company had previously been slow to adopt CSPO, as its low palm oil needs did not qualify it for DR PETRA MEEKERS bulk CSPO purchases from its suppliers. However, following Director of CSR and Sustainable Development, probing by an Australian non-governmental organisaon, the Musim Mas Holdings management overcame the problem by invesng in its own tank, eliminang the need to buy a full truck of CSPO. We have to try to see how we can link with different stakeholders in what we call the landscape approach. These Ayam Brand has also joined the Naonal Alliance for Sustainable are the plaorms that can create value Palm Oil in Singapore, iniated by the World Wide Fund for Nature for us. (WWF). The alliance seeks to unite all players that use, produce or trade palm oil to advance the uptake of sustainable palm oil in Singapore. As one of the pioneer members, Ayam Brand hopes to be an example for small- and medium-sized enterprises that do not have a big sustainability team, said Mr Hervé Simon, Group Markeng Director of Ayam Brand.

MR HERVÉ SIMON

Group Markeng Director, Ayam Brand

Sustainable supply chains are not only for big internaonal companies. (Ayam had) a strong management to say yes (to sustainability), and within a few months…all the palm oil we used was sustainable.

Third Singapore Dialogue on Sustainable World Resources 7 PANEL 2 Greening the Palm Oil Supply Chain: Progress and Challenges

Beyond switching to sustainable palm oil, companies must also increase transparency to maintain accountability to their stakeholders. One way is through the use of eco-labels to inform consumers about the environmental impacts of the products they purchase. A case in point is the Singapore Green Labelling Scheme (SGLS), which endorses environmentally-friendly industrial and consumer products. The Singapore Green Label is administered by the Singapore Environment Council (SEC). During 2015’s haze MS ISABELLA LOH episode, the Label was instrumental in enabling the recall of paper Chairman, products linked to fires from supermarket shelves. Singapore Environment Council SEC has recently launched a new assessment criteria for products Taking down the ssue containing palm oil. Moving forward, SEC intends to focus on the products…had a knock-on effect globally. It resonated through every upstream side of the supply chain – the root cause of the haze procurement channel there was in the problem – to understand how companies can be more responsible. whole region that asked the pernent queson: ‘Are we responsible?’ Against the backdrop of these developments in Singapore, China also sees a need to drive demand for CSPO, both domescally and overseas. The China Chamber of Commerce for Import & Export of Foodstuffs, Nave Produce and Animal By-Products (CFNA), which is under the Ministry of Commerce of the People's Republic of China, monitors and supervises all imports and business operaons of palm oil.

CFNA, together with the Brish government, has recently developed a guide for Chinese enterprises on how to invest in and MR BIAN ZHENHU produce sustainable palm oil overseas. While the Chinese President, government plays a vital role in CSPO uptake, support from other China Chamber of Commerce for stakeholders, including suppliers and consumers, will go a long way Import & Export of Foodstuffs, in making CSPO use the norm. Nave Produce and Animal By-Products

CFNA will leverage its influence and monetary funcons in the agricultural markets to target prices, (thereby) applying sustainability in pracce.

8 Third Singapore Dialogue on Sustainable World Resources SupporƟng Smallholder Sustainability: What are the Gaps? PANEL 3

Supporting Smallholder Sustainability: What are the Gaps?

In the bid for a more inclusive, socially and The various categories of smallholders also environmentally sustainable agriculture translate into divergent experiences and development, small-scale farmers – or constraints, complicang external intervenon smallholders – have a fundamental role to play. and support. To cite just two categories, These farmers, who in the palm oil industry independent smallholders, who in total own occupy on average 2 hectares of land, account more than 3.1 million hectares of oil palm for as much as 40% of global output in some farmland, culvate oil palm without external sectors, making them a vital part of the supply help. On the other hand, plasma smallholders chain. In Indonesia, smallholder growers enjoy an exclusive supply agreement with a mill, currently account for over 40% (4.2 million and also tend to receive technical assistance hectares) of all plantaons. and access to agricultural inputs under their partnership scheme. Despite their significant contribuon, smallholders, especially in the developing world, connue to live in poverty in rural, remote areas. They oen lack the technical know-how and concrete support from buyers and markets to make their produce more sustainable.

Third Singapore Dialogue on Sustainable World Resources 9 PANEL 3 SupporƟng Smallholder Sustainability: What are the Gaps?

Sll, the prevalence and persistence of environmental damage arising from the agriculture industry clearly indicate the gaps and challenges facing these small producers. To deal with these complexies, Dutch-based non-governmental organisaon (NGO), Solidaridad Network tailors its approach to smallholders specifically based on their individual contexts.

In West Kalimantan, for instance, many smallholders are looking to MR HENDRY PREDY YANG switch from rubber to palm oil culvaon, as the laer is perceived Palm Oil Coordinator to be more profitable. As their current planng methods are largely (South & South East Asia), Solidaridad Network based on trial and error, Solidaridad is working with a credit union If you want to get our support in to help 60,000 farmers access finance and training in good terms of financial access, ferliser agricultural pracces. By increasing yields, Solidaridad hopes to access, good agricultural pracces reduce the need to encroach on adjacent forests. The organisaon training…you have to deliver (no also monitors farmers operang near forested areas on a monthly deforestaon). Otherwise, we take all basis to detect illegal deforestaon, said Mr Hendry Predy Yang, of them away. Palm Oil Coordinator (South & South East Asia) of Solidaridad Network.

Besides NGOs, large companies are also iniang mul-stakeholder collaboraons to help smallholders become more sustainable. A case in point is the Sustainable Palm Oil and Traceability with Sabah Small Producers (SPOTS) Iniave. Under the iniave, Clariant, a specialty chemical company, is partnering Wilmar Internaonal, together with their joint venture, The Global Amines Company, local social enterprise Wild Asia, and L’Oreal to MR STEPHAN LYNEN educate 500 Malaysian palm oil smallholders on sustainability, cerficaon and supply chain traceability. This is expected to Head of Region (Asia Pacific), increase producvity by 20% and lead to RSPO cerficaon for the Industrial & Consumer Speciales, Clariant (Singapore) farmers by 2020. If you are in the middle of the value chain, you have to differenate Considering that securing RSPO cerficaon can pose significant yourself... offering sustainable costs for smallholders, economic incenves will be needed to soluons is highly rewarded in the overseas market, and also in the change the behaviour of most small farmers. The SPOTS Iniave Chinese market. did so by guaranteeing the farmer a payback in the five-year contract following yield improvement, beer agricultural pracces, and plantaon management. Once their output is cerfied, these farmers will also enjoy increased access to the global market, developing an advantage over their competors.

For other smallholder groups, the process of securing RSPO cerficaon alone has imparted important lessons and created many opportunies. In 2013, the Amanah Associaon became the first independent smallholder associaon in Indonesia to achieve MR HJ NARNO RSPO cerficaon, with support from various stakeholders such as WWF-Indonesia and Asian Agri. Since securing the cerficaon, Group Manager, these small-scale farmers have formed a group for more efficient Amanah Associaon ferliser applicaon. Furthermore, the associaon has formed a Amanah Cooperave (sees) special unit to not only manage forest fires internally, but also help cerficaon, in this case RSPO the areas surrounding their plantaons with fire prevenon. cerficaon, as a step that opens up so many opportunies for (us) to grow, to expand.

10 Third Singapore Dialogue on Sustainable World Resources SupporƟng Smallholder Sustainability: What are the Gaps? PANEL 3

Amanah Associaon’s success in obtaining RSPO cerficaon has demonstrated that cerficaon is achievable, even for independent smallholders. Even though the group is now working on maintaining their RSPO cerficaon, this is by no means the end goal. Instead, they are keeping their focus on wider sustainability concerns, said Mr Irwan Gunawan, Deputy Director of WWF Indonesia.

MR IRWAN GUNAWAN

Deputy Director, WWF Indonesia This is the year to grasp the sustainability issue at the landscape level…to (create) innovave soluons to alleviate poverty.

Third Singapore Dialogue on Sustainable World Resources 11 PANEL 4 Sustainable Finance: The Region’s Progress

Sustainable Finance: The Region’s Progress

Crically, realising the vision of sustainable authority of Indonesia’s Financial Services development depends on channelling Authority (OJK). The OJK is a government funds towards environmentally and socially agency which regulates and supervises the responsible iniaves. Though the financial financial service sector’s acvies in sectors of ASEAN countries currently banking, capital markets, and non-bank pracse varying levels of sustainable financial industries. finance, concrete steps and progress have been achieved in recent years. Unfortunately, progress towards sustainable finance is likely to be slow if As compared to its ASEAN counterparts, financial instuons are le enrely on Indonesia – the largest economy in ASEAN their own to develop the necessary – is in the forefront of sustainable finance capacity. Instead, a combinaon of by many measures. In 2014, the country top-down and boom-up approaches is launched and began implemenng its important, said Dr Muliaman Hadad, “Roadmap for Sustainable Finance in Chairman of OJK. As government agencies Indonesia”. This roadmap outlines specific such as the OJK offer guidelines, provide measures to improve the sustainability of incenves and set targets, gradually the Indonesian financial sector and applies increasing buy-in from financial instuons to all instuons that fall under the will help sustainable finance become a part of mainstream financial pracce.

12 Third Singapore Dialogue on Sustainable World Resources Dealing with sustainable finance is not necessarily an addional burden for the financial instuons. (It) is also profitable…Creang sustainable requirements is a future opportunity for financial instuons to do business.

DR MULIAMAN HADAD Chairman, Financial Services Authority (OJK), Indonesia

Mainstreaming sustainable finance can One such experience was shared by yield various benefits. These include the Standard Chartered Bank. Through creaon of new products that generate establishing its environmental and social profits and the strengthening of financial risk framework, Standard Chartered instuons’ social responsibility. Bank has developed a stronger capacity Addressing environmental and social to manage its reputaonal and concerns in loan disbursements and operaonal risks, while helping its clients investments will further contribute to manage their environmental and social beer risk management. risks. Standard Chartered Bank regards managing non-financial risks as an important part of their role, as sustainability is crical to a company’s long-term success.

Third Singapore Dialogue on Sustainable World Resources 13 PANEL 4 Sustainable Finance: The Region’s Progress

In addion, Standard Chartered Bank is working with the rest of industry to share best pracces, capabilies and know-how. Following the launch of the Associaon of Banks in Singapore (ABS)’s responsible financing guidelines in October 2015, internaonal banks such as Standard Chartered Bank have been working through ABS to conduct masterclasses and support other banks in integrang Environmental, Social and Governance (ESG) principles into their operaons. MS JUDY HSU

Singapore Chief Execuve Officer, At the same me, China has demonstrated great polical will to Standard Chartered Bank green its economy through the financial sector, and has taken concrete steps to do so. For a long me, manufacturers in China We have made our ESG standards very transparent to the public, so sought economic gains at the expense of the environment, while there’s no secret about it…This way, local government officials “turned a blind eye” to the problem due everybody knows what we expect of to the pursuit of GDP and their own careers. Financial instuons ourselves, as well as what we expect may also act as accomplices in exacerbang environmental from our clients. polluon, said Professor Wang Yao, Deputy Secretary General of China Green Finance Commiee. As a result, parts of China, especially Beijing, connue to face hazardous levels of smog, alongside other kinds of polluon.

Recognising the urgency of the problem, the Chinese government has included green finance in the latest version of its naonal development strategy – the 13th Five-Year Plan (2016-2020) – for the first me. At the end of 2015, the People’s Bank of China (PBOC) published its Green Financial Bond Guidelines, making it the first country in the world to release official rules for the PROFESSOR WANG YAO issuance of green bonds. Shortly aer, Shanghai Pudong Development Bank and the Industrial Bank of China received Deputy Secretary General, approval to issue green bonds in accordance with the guidelines. China Green Finance Commiee, China Finance Society While China has made significant regulatory progress due to the We need both a top-down and strong influence of its financial regulators, awareness building and boom-up (approach to green behaviour change will take a long me to effect. It is important finance). China is now building such a green finance system. that we embark on sustainable finance reform now, regardless of economic circumstances, in order to create a sustainable environment for future generaons.

14 Third Singapore Dialogue on Sustainable World Resources Lessons fromYesterday, Hope for Tomorrow

Indonesia, to me, is taking The Third Singapore Dialogue on Yet, the greatest progress can be leadership on this issue Sustainable World Resources seen in the strengthening of polical reviewed the lessons learnt and best will. Where aempts to deal with the today…in this change of pracces for sustainable resource haze issue only resulted in a atude, we hope that management from the lenses of finger-poinng exercise between the there will be future ways different stakeholders, from governments of Indonesia, Malaysia for Singapore and ASEAN companies and smallholders to and Singapore, the new Jokowi governments and financial administraon has taken leadership to cooperate with this new regulators. While short-term and shown more signs of being Indonesian administraon. measures such as fire suppression willing to listen. While it is not likely can help to tackle the fires and haze, that we will be able to avoid a repeat some companies have supported of the haze in the coming months, ASSOCIATE PROFESSOR SIMON TAY these with longer-term measures, SIIA Chairman Simon Tay sees cause Chairman, such as cerfying their supply chains for increased opmism that the and improving transparency and system will become more robust, accountability. that capacity will grow, and that regional leadership will move in the right direcon.

Third Singapore Dialogue on Sustainable World Resources 15 COMMENTARY How Indonesia’s neighbours can help it fight the haze

Early this year, the BRG was formed with the clear and ambious aim of protecng and restoring 2 million ha of How peatland, one of the key sources of fires and haze. In March, the Riau provincial government declared a state Indonesia’s of emergency aer fires in some districts began spreading rapidly because of strong winds. Recognising neighbours and declaring the emergency allowed an earlier and stronger response, and more than 700 police and can help it soldiers were deployed to ensure the fires did not get fight the haze out of hand. These are clear signs that the Jokowi administraon intends to respond not only with speeches but also with hard work on the ground and in reshaping vital agro-forestry sectors. BY SIMON TAY For Indonesia, taking leadership is in the country’s naonal interest. The fires and haze cause severe social, AND LEE CHEN CHEN environmental and economic costs; last year, some 2.6 This commentary appeared in TODAY on 6 May, 2016, and million ha of forest and farmland in Indonesia were in The Jakarta Post under the tle “Indonesia leads on fires burnt, and the cost to the Indonesian economy was and haze: What others should do” on 30 April, 2016. esmated by the government to be as much as US$33.5 billion (S$45.5 billion).

Indonesia is making every effort to ensure that the For the first me, a number of concession licences have terrible fires and haze suffered last year will not recur. been cancelled. Bank Mandiri, the country’s largest This reassurance was given at the recent 3rd Singapore bank, has stopped granng loans to develop palm oil Dialogue on Sustainable World Resources (SDSWR) by plantaons on peatlands. Just before Mr Nazir spoke, Mr Nazir Foead, who heads the newly created Peatland the president announced a moratorium on new Restoraon Agency (BRG). concessions for oil palm plantaons.

This is the clearest indicaon yet by a senior Indonesian Sll, quesons remain. Different interests are at play. official of the priority given to this issue by the Large corporaons may sll find it convenient not to administraon of President Joko Widodo. care about the fires or the broader quesons of sustainability since these can add to their producon Given that fires have recurred since 1997-1998 and cost. Many such firms have polical influence and worsened in the past two years, some may cynically bringing them to task will not be easy. dismiss this as nice words on paper that is not fireproof. But Indonesia is undergoing a sea change in atudes Moreover, there are many small-scale farmers who do towards addressing this problem. not have the means or financial capacity to switch to land-clearing without fire. While these communies The statement by Mr Nazir, who holds a must be protected from the fires and haze, they also ministerial-level appointment, did not come out of the need to find ways to connue to work for their blue. Last year, President Jokowi, as he is popularly livelihoods. These are important economic and social known, visited provinces hit by the haze and saw dimensions to be resolved in tandem with the need for first-hand how terribly it afflicted Indonesians living beer environmental protecon. nearest to the fires. At last December’s Paris meeng to conclude the global agreement on climate change, the President pledged to cut emissions, which in Indonesia mainly come from forest fires.

16 Third Singapore Dialogue on Sustainable World Resources How Indonesia’s neighbours can help it fight the haze COMMENTARY

In many ways, the challenges of dealing with the fires Here, Indonesia’s own banking regulator, the Financial and haze are symptomac of much wider quesons in Services Authority (OJK), has taken the lead. OJK Indonesian polics and the change promised by Mr released its Sustainable Finance Roadmap last year and Jokowi, as the non-elite “people’s President”. These has since launched an 18-month project to help local quesons are sll to be resolved by Indonesians. banks integrate ESG criteria into their credit approval frameworks. At the SDSWR, the chairman of OJK, Dr But this does not mean that others outside of Indonesia Muliaman Hadad, pointed out that sustainable finance cannot assist. Now that the Indonesian government is can be profitable and that Indonesia will connue to taking the lead in addressing the issue, what can others promote the concept in the financial sector. do to support it? Banks and financial regulators in the region can support Singapore, the region and indeed the global community Indonesia’s efforts by harmonising measures with one can help in three main ways. another. This will prevent firms that cannot meet the ESG standards from shiing to other markets and The first is to strengthen governance in the resource lenders with lower or no standards. sector including the cross-border corporaons that dominate it. The second is to foster an informed Finally, Singapore and the internaonal community can consumer movement and generate support for support Indonesia’s grassroots efforts to prevent and sustainably sourced products. The third is to increase suppress fires by collaborang transnaonally with the capacity of local communies to prevent and them on capacity-building projects at the provincial respond to fires. level. The haze crisis last year saw ground-up efforts by civic groups in Singapore to supply masks and First, the cross-border control of corporaons has been humanitarian aid to villages in some of the worst-hit an exercise in finger-poinng for many years, with provinces. More community-to-community projects allegaons that Singaporean and Malaysian firms are can be promoted to encourage good agricultural involved in and condone unsustainable pracces. pracces and eventually help local communies Singapore’s Transboundary Haze Polluon Act (THPA) migate the external risks arising from climate change. aempts to address that. The Jokowi administraon has demonstrated resolve Singapore has in the last year been acve in taking to and leadership to avoid a repeat of last year’s haze. task corporaons and their key officers involved in the More can be achieved when we stand ready to lend our haze. As reported at the SDSWR by Singapore Minister full support. for the Environment and Water Resources Masagos Zulkifli, the Government has served noces on a number of companies and will hold all Singapore-based companies to account. Moreover, it recently served noce to a foreign director of one such company while he was vising Singapore. AUTHORS

A second dimension of governance concerns how these corporaons obtain financing. If environmental SIMON TAY is Chairman of the Singapore protecon and sustainability, alongside commercial Instute of Internaonal Affairs and consideraons, are integrated and quanfied as part of LEE CHEN CHEN is Director, Policy Programs the risk framework for banks, errant companies will have to mend their ways or face difficulty in obtaining financing for their operaons. At present, many internaonal banks already screen their loans on environmental, social and corporate governance (ESG) criteria, seeking cerficaon or other proof that their clients’ pracces are internaonally acceptable. The gap has been with the regional banks.

Third Singapore Dialogue on Sustainable World Resources 17 About Singapore Institute of International Affairs (SIIA)

The SIIA is a non-profit, non-governmental organisaon dedicated to the research, analysis and discussion of regional and internaonal issues. Founded in 1961, it is Singapore’s oldest think tank. Since 2013, the SIIA has ranked as one of the top think tanks in Southeast Asia and the Pacific in the Global Go To Think Tank Index performed by the University of Pennsylvania. In the same index, SIIA has also consistently ranked among the top 100 think tanks in the world.

The SIIA has organised many dialogues on the subject of transboundary haze since 1997, when large-scale fires in Kalimantan and Sumatra led to one of the worst haze episodes in Southeast Asia on record. In May 2014, the SIIA hosted the First Singapore Dialogue on Sustainable World Resources (SDSWR), a mul-stakeholder plaorm that aims to promote the exchange of best pracces to deal with haze polluon and other sustainability issues in the plantaon sector. This was followed by a second edion in May 2015, at which the SIIA also launched its Haze Tracker website (www.hazetracker.org).

At the third SDSWR, held in April 2016, the SIIA launched its policy brief, “Southeast Asia's Burning Issue: From the 2015 Haze Crisis to a More Robust System”. The event aracted significant media coverage, with broadcasts on Channel NewsAsia (CNA) and close to 40 reports in prominent media outlets, including CNN, The Straits Times, CNA, TODAY, The Jakarta Post, The Naon, Lianhe Zaobao and Antara, as well as specialised plaorms such as Eco-Business and Forest Hints.

18 Third Singapore Dialogue on Sustainable World Resources

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