At Bank of Singapore (the Bank), our approach to sustainability is grounded in our commitment and social responsibility to create long-term value for our clients and other stakeholders.

As a responsible business and steward of assets managed by the Bank’s Discretionary Portfolio Management (DPM) team, we play an important role in helping clients allocate capital to achieve returns on their investments.

Environmental issues such as climate change, loss of biodiversity, pollution, and changes in land use, present significant risks to the assets we manage. It is therefore important that we identify and monitor these risks closely so that we can mitigate them for the benefit of our clients, stakeholders and ultimately society at large.

As part of our endeavour to align our process with regulatory expectations and requirements we continue to integrate environmental risk considerations into our DPM investment processes, including governance, research, portfolio construction and risk management aspects.

We view sustainability integration as a journey. In charting the path for a sustainable future, we must go beyond the creation of financial value. At Bank of Singapore, we believe that our actions today will define what we stand for in the decades to come.

In response to increased environmental-related risks to investments, the following governance framework is set up to manage sustainable investment in relation to our DPM services.

1. Sustainable Investment Policy (SIP): established to enhance the investment activities undertaken by the Bank under its DPM services by integrating the assessment of Environmental, Social and Governance (ESG) factors into our investment processes.
2. Sustainable Investment Governance Committee (SIGC): delegated by the Bank’s Global Management Committee (GMC), the SIGC is tasked to discuss, review and advise on sustainable investment matters pertaining to DPM investment process - including policies, proposals and procedures which are developed by the business units to comply with the SIP. Matters deemed material will be updated to the GMC.
3. BOS Global Management Committee (GMC): the GMC is the collective senior management of the Bank, inclusive of its branches, affiliates, representative offices and subsidiaries. The GMC has the delegated authority of the Bank’s Board of Directors to make decisions in the best interest of the Bank and its long-term success considering interests of its shareholder, customers, employees and other stakeholders as an integral part of the OCBC Group.  In its execution of its responsibilities, the GMC will oversee sustainability matters including review of the Bank’s positioning on the topic as well as related policies, framework and procedures to be implemented.
4. Sustainability Forum: the central coordination body on sustainability matters for the Bank, which escalates all important sustainability matters to the GMC.

The SIGC supports the oversight and implementation of sustainability practices within DPM’s portfolio management activities. The SIGC comprises relevant members of the Bank’s senior management team who facilitates the ongoing workstreams to prioritise initiatives, provide insights and guidance for the working groups.

The SIGC reports its activities and is overseen by the GMC which comprises the collective senior management team of the Bank, who are responsible for making high-level decisions, in this case, pertaining to the Bank’s overall sustainability strategy and operations.

We expect to continually update our approach to managing and disclosing environmental risk as methodologies for assessing, monitoring, and reporting such risks evolve. Additionally, how we implement relevant regulatory guidelines going forward, will be commensurate with
the scale and nature of our DPM’s activities and risk profile.

In 2023, Bank of Singapore became the first private bank to be a signatory of the Singapore Stewardship Principles, adopting the 7 principles in a phased manner, reinforcing our commitment to sustainable investing practices.  Our stewardship statement is available on the Bank’s corporate website.

Our strategy for managing environmental risk is conducted with two primary objectives:

• seek guidance and align with the OCBC Group (the Group), where appropriate
• adopt guidelines and processes at the Bank’s level, specific to our private banking business

Where relevant, we coordinate with the Group on sustainable investment matters through the Group Sustainability Steering Committee (GSSC) and contribute to the Group’s sustainability efforts as reported in the annual OCBC Sustainability Report.

At Bank of Singapore, we believe that aligning the financial markets with sustainable development is vital in support of the United Nations Sustainable Development Goals (SDGs). We aim to provide products and services that help our clients achieve not only their financial goals, but also their aspirations to contribute to a more sustainable world.

Our DPM team employs sustainable investment processes by leveraging the depth of knowledge in the team, a structured approach. and the Bank’s strength in research. Accordingly, we apply our conviction in portfolio construction and risk management in a responsible manner.

Depth of knowledge

At Bank of Singapore, investment teams have access to sustainability resources and capacity building programs from in-house knowledge sharing, ecosystem partners, leading industry associations (such as the Association of Banks in Singapore and Institute of Banking and Finance Singapore) to develop and grow our specific team functions.

Structured approach

We adopt an approach which integrates the consideration of ESG factors into our investment processes, including research, portfolio construction and risk management. We believe that such an approach provides investment returns and solutions which in turn enable our clients to achieve their financial and sustainability goals.

Equity research

We assess the valuation-relevant, sector specific material ESG risks, referencing insights from third party ESG data providers as well as internal research. Where ESG risks are deemed material, those risks are factored into our earnings estimates and/or cashflow forecasts, alongside our premium/discount assumptions and costs of capital. We also consider broader sustainability themes and trends such as the potential impact of climate change and extreme weather events on selected industries to improve our understanding and ability to incorporate key environmental risk metrics into our research and investment analysis.  

Fixed income research

We consider ESG risks by referencing insights from third party ESG data providers and company disclosures, as well as internal research. We also consider the potential impacts of climate change on selected industries and assess if environmental challenges may lead to the deterioration of credit quality and whether there are any existing mitigating factors. For companies with relatively higher carbon emissions, we conduct analysis with the support of third party ESG research.

Funds selection

We consider the below two primary aspects when conducting fund selection:

1. How a fund manager invests – the qualitative assessment of the integration of ESG considerations in a fund manager's philosophy, investment process and team resources, etc.; and
2. What the fund invests in – the composition of portfolio holdings-based analysis based on third party ESG rating data^[1].

For Undertaking for Collective Investment in Transferrable Securities (UCITS) funds, we also take into account a fund's classification within the EU Sustainable Finance Disclosure Regulation (SFDR) framework.

DPM Mandate Portfolio construction

Aside from utilising the Bank’s fundamental research, we also consider environmental risk factors when constructing portfolios. We adopt relevant third party ESG research and data as part of the investment decision-making process.

Stewardship approach

As fundamental long-term investors, we aim to be active owners in investee companies. While we manage different strategies across various investment objectives, the following demonstrates DPM’s approach to stewardship:

• We are our clients’ trusted stewards.
  • We seek to act in the interests of clients, and to be consistent with client mandates in fulfilling our responsibilities. We also seek to be responsible investors and advisers.

• We exercise stewardship in our choices – regarding the businesses we invest in and stakeholders with whom we interact.
  • We believe that stewardship covers a broad spectrum of issues including strategy, long-term performance, risk, financials, culture, remuneration, environmental and social considerations, as well as corporate governance.

• We will uphold transparency by having policies to identify and manage conflicts of interest.
  • When conflicts of interest arise, we will take reasonable steps to prioritise our clients’ interests over our own interest or engage clients to discuss the resolution of such conflicts of interest.

^[1]For details on MSCI ESG rating, please refer to the MSCI website: ESG Ratings - MSCI

Climate risk management

Climate risk management has become increasingly important due to rapid temperature rise and as extreme weather events increase in intensity. As such, we need to consider our exposures to climate risks and be prepared to proactively assess, manage and mitigate the climate risk.

Partnering with an external data vendor, we collect high quality data on carbon emissions, ESG ratings and climate value at risk. We develop the process to monitor both the climate-related risk and opportunities within our portfolios. Specifically, we:

1. conduct quarterly assessments to measure the Climate Value-at-Risk of our investments under different climate-related scenarios. These scenarios analyse the physical and transition risks, and the opportunities that are associated to the investees in our portfolios.
2. track an environmental risk watchlist to gauge the investee companies’ contributions to climate change across asset classes. The watchlist includes the changes of ESG ratings and the top contributors of carbon emissions.

The results of the above climate risk monitoring are discussed and analysed along other financial risks, for the team to make appropriate investment decisions.

Exclusion policy

As part of our stewardship approach, the Bank’s DPM team seeks to avoid investing in companies that may have an adverse impact on certain ESG issues, which can have material impacts on investment returns and client outcomes. Accordingly, we have formulated an exclusion policy which is being rolled out on a staggered approach throughout 2024 and 2025.

We believe that ESG factors can have material impacts on investment returns and client outcomes and seek to exclude companies that do not meet certain Norms-based (company conduct) or Values-based (business activities) standards from the DPM investable universe. Norms-based exclusions include United Nations Guiding Principles & Human Rights concerns, while Values-based exclusions relate to a firm’s business activities (such as Tobacco or Controversial Weapons).

In formulating the Exclusion policy, we considered OCBC’s approach to exclusion as well as best practice regarding sustainability from industry leaders.

The policy adopts a multi-level approach.

Level 1 – this is our base case exclusion policy – and uses Norms-based exclusions (United Nations Guiding Principles on Business & Human Rights Concerns).

Level 2 – incorporates Level 1 (Norms-based) exclusion and introduces base line Values-based (e.g. Controversial Weapons, Thermal Coal, Tobacco) exclusions with certain revenue thresholds that trigger exclusion.

Level 3 – our most stringent scenario (suitable for strategies specifically marketed as “sustainable”. Level 3 Exclusion includes all proposed Exclusion parameters, with more stringent Values-based revenue thresholds, compared with Level 2.

DPM adopts a differentiated approach when it comes to exclusion. Where appropriate and feasible, mandates/strategies will be scoped into the policy. For certain strategies, including customised mandates, clients may choose to opt out in the mandate agreement.

The Exclusion Policy was approved by the SIGC and will be subject to annual review and revision.  

Investment considerations

We monitor greenhouse-gas emissions and climate change-related data for our investments.

Such factors form part of our investment analysis when considering climate change.

This data is sourced via our proprietary research on ESG and climate change, as well as third party data vendors.

We believe such information provides useful insights into a company’s business model and reporting quality. It also enables a performance assessment of Scope 1 and 2 greenhouse gas (GHG) emissions.

We believe that the data currently disclosed by companies does not always adequately reflect a company’s exposure to climate risk, which could materially affect their viability as a going concern or their future financial performance.

Therefore, where necessary, our investment team seeks to consider other qualitative disclosures and risk metrics as part of their understanding of the business model and associated climate-related risks.

Accordingly, we are able to conduct scenario analysis with regard to carbon footprint and climate-change analysis across our investment holdings.

Such analysis allows us to identify a portfolio’s overall carbon metrics and highlight high emitting companies which allows us to prioritise companies for potential further engagement.

Climate disclosure reports can be made available upon request to clients who hold DPM ESG-aligned mandates.

As guided by Task Force on Climate-Related Financial Disclosures, our DPM team will continue to enhance its structured approach to managing environmental and climate risks.

Research

The Bank’s research team endeavours to consider broader sustainability themes in greater depth, such as the potential impact of climate change on selected industries, to sharpen our focus on material ESG risks. Depending on data availability, we could incorporate such environmental risks into our analysis and its impact on the overall fundamentals of the company.

Portfolio construction

Our DPM team strengthens the investment process by incorporating environmental risks and opportunities identified by the Bank’s research team and risk management tools. These data will be considered in conjunction with our existing fundamental analysis with the aim of optimising investment outcomes.

Towards a better future

Environmental risks pose material threats and challenges, but also opportunities. It is imperative for the Bank to take meaningful action to drive a more sustainable path forward and to deliver performance on client investments while considering material ESG goals to ensure a lasting legacy for future generations.

ESG Disclaimers

There are currently no universally accepted ESG standards, and no consensus as to whether activities and practices or products or services are “environmentally friendly”, “sustainable”, “responsible”, “climate friendly”, etc. Evaluation of ESG outcomes or metrics may require forward-looking scenario analysis, estimates, interpretations and assumptions and may be uncertain and speculative. There may not be scientific consensus. Scientific evidence and data may not be conclusive or there may be limitations, and new evidence and data may be emerging. ESG standards may depend on subjective or value judgments. ESG standards, as well as laws, rules and regulations may differ from jurisdiction to jurisdiction. Taxonomies have been developed in different jurisdictions to classify activities as “environmentally sustainable”, “green” or the equivalent, and different taxonomies may classify the same activity differently. Achieving one ESG goal may be at the expense of, or require a compromise on, other ESG goals. The Bank’s DPM Sustainable Investment Policy may therefore not meet your expectations or objectives and may not be consistent with certain ESG laws, rules, regulations and standards. There is no guarantee that there will not be negative ESG outcomes, and we do not give any assurance that your investments will have a positive ESG impact. You should ensure that you understand the Bank’s DPM Sustainable Investment Policy and assess whether the Bank’s DPM Sustainable Investment Policy meets your expectations or is appropriate for you, before making any investment commitment. You are solely responsible for your own investment decisions.

The Bank relies on third-party ESG ratings. While the Bank has selected its third-party ESG rating providers in good faith and with reasonable care, the Bank has not independently verified the ESG ratings of third-party providers. The Bank gives no representation or warranty, express or implied, as to the quality, accuracy, completeness, rigour, timeliness or verifiability of such third-party ESG ratings, and shall not be responsible or liable for such third-party ESG ratings. ESG ratings may be based on data that is incomplete, due to limitations or otherwise, or based on commitments and targets which may not be achieved. You should review and understand the disclosures made by such third-party ESG ratings providers on their methodologies, data sources and other relevant information, and obtain advice from professional advisers as necessary.

Taking into consideration ESG factors may be at the expense of financial returns, especially in the short-term. ESG risks may result in financial losses, which may materialise in the short, medium or long-term. ESG factors and screening may also result in certain investments that deliver high financial returns being excluded.