Responsible Financing

Responsible Financing

We recognise that we play an important role in shaping the actions of our customers and supporting long-term sustainable development through our financing practices. We focus on small businesses, companies that are oriented towards responsible use of natural resources, renewable energy- use innovation and other sustainability- linked activities.

Our Policy and Commitments

To support responsible financing, UOBI conducts portfolio monitoring related to the ESG risk profile. Each prospective debtor must pass due diligence to ensure that the loan profile and objectives would not be conflicted with the sustainability framework. For example, UOBI will not proceed further with prospective debtors who have been involved in incidents or are at risk of causing environmental pollution, indications of causing human rights violations, or having a negative impact on society.

UOBI has developed Credit Acceptance Guidelines based on sector specifications and ESG checklists to assist our relationship managers in identifying, assessing and reviewing ESG risks.

Debtors that fall within the following ESG-sensitive industries are subject to enhanced due diligence with sector specific guidelines:

  • Agriculture
  • Forestry
  • Metals and Mining
  • Defense
  • Chemical
  • Energy
  • Infrastructure; and
  • Waste Management.

UOBI adopts the Equator Principles into our credit policy. The Equator Principles Guidelines have been published through Circular No. 22/RMG/0002 on 11 February 2022. This guideline is part of the risk management framework which provides guidance on the application of the Equator Principles, which includes the categorisation of project financing, environmental and social review processes, and covenants that shall be met.

We have developed checklists containing ESG risk classifications to identify, measure and manage ESG risks. The ESG clause of the debtors is evaluated as part of each Credit Approval document before being added to the credit facility agreement.

Portfolio monitoring related to ESG risk profile is conveyed to management through meetings or circulation to members of the Credit Policy Committee (CPC) on a monthly basis. Monitoring of new debtors and existing debtors identified as having ESG-related issues (e.g PROPER results or ESG-related incidents), as part of the Bank's Watch List framework, is carried out monthly through Credit Portfolio Quality Meetings (CPQM).

Review of Policy and Performance Effectiveness

UOBI has issued the Equator Principles training module in the form of electronic learning (e-learning) which has been attended by 93 per cent of 307 employees required to attend training on 23 February 2022. The Credit Policy Committee (CPC) routinely conducts meeting to monitor portfolios related to ESG risks on monthly basis.

UOBI continuously organises cooperation between related functions in terms of classifying Bank debtors into the Indonesian Green Taxonomy category and their reporting based on the prevailing OJK guidelines.

Throughout 2023, UOBI's approach has effectively prevented risky financing or negative impact on ESG aspects.

Managing Climate Change Risk

Global warming has become a great concern for the global community, given its impact on economic, social and environmental aspects that can affect human life. Likewise, Indonesia, which has ratified the Paris Agreement, has expressed its commitment to reducing greenhouse gas (GHG) emissions by issuing Indonesia's Green Taxonomy 1.0.

In practice, Green Taxonomy is a classification system, which determines a list of environmentally friendly economic activities. This classification is based on business activities that support the efforts of environmental conservation along with the mitigation and adaptation to climate change. This way, UOBI contributes to mitigating the impact of climate change by ensuring the investments have met the sustainable category by integrating environmental, social, and governance aspects.

Our Policy and Commitments

To support the mitigation of climate change risk, UOBI conducts a risk assessment, especially on environmental impacts in line with the commitment to responsible financing. UOBI encourages the financing of all environmentally- friendly business activities such as climate change adaptation, renewable energy, and environmentally-friendly transport.

UOBI participated in the Indonesian Green Taxonomy pilot project, which started in July 2022 and lasted until this report was prepared. Through financing practices, we have an important role to form responsible actions from customers to support sustainable long-term development.

Review of Policy and Performance Effectiveness

All policies taken related to the banking sector's support for climate change mitigation have been going well. Throughout 2023, UOBI has disbursed financing for business activities in the renewable energy sector amounted to IDR242 bn.

UOBI has always assisted business activities that support climate change mitigation by implementing ESG impact assessment.