Environmental & Social Issues Facing Financial Institution (Maybank)

Diagram 1: Research presented by International Finance Corporation, from

www.ifc.org/wps/wcm/.../Banking_on_Sustainablity_Launch.pdf

1. Environmental Legal Issue /Liability Risk

As Wahlen (1994) states, Commercial bank loan portfolios are typically 10 to 15 times
larger than bank equity; therefore bank loan portfolio cash flows and default risks are likely to
have an important impact on bank stock market values (p. 455).
Maybank as a borrowers involved in this type of risk have to eliminate their products or incur
legal penalties, or may experience reduced demand for their products. As a result, the probability
of loan default which will indirectly affect the Maybanks revenue will increase. In
circumstances where both direct and indirect environmental risks arise, banks face the prospect
of paying twice for the same liability of the borrower (Coulson & Dixon, 1995).

2. Reputational Risk
Reputational risk refers to how bank involvement in credit financing can adversely affect its
reputation (Thompson P. , 1998). Reputational risk arises due to a banks indirect involvement in
environmental degradation which will render the bank susceptible to public criticism, adverse
customer reaction, negative media coverage, and pressure from NGOs.
3. Waste
The production and use of paper has a number of adverse effects on the environment,
collectively its known as paper pollution. Pulp mills contribute to air, water and landpollution.
Discarded paper is a major component of many landfill sites, accounting for about 35 percent by

weight of municipal solid waste (US Environmental Protection Agency, 2005). Given
the environmental impact of paper is significant, it become a critical issue for Maybank.

Figure 2: North America contributes to the world largest annual paper consumptopn per capital

4. Pollution Abatement

Market and regulatory failures result in extensive levels of pollution, causing damage to
human health, and natural and productive assets. The prevention and mitigation of these effects
call for the proper set of environmental policies and policy implementation instruments (Lovei,
1995). It is indeed becoming urgent that Maybank and the financial services industry as a whole
play a role in addressing the looming climate and resources crunch and the transition to a lowcarbon economy.
5. Supporting Biodiversity Issue
It has long been feared that human activity is causing massive extinctions. Despite increased
efforts at conservation, it has not been enough and biodiversity losses continue (Shah, 2014). In
this case, Maybank is best placed to play a proactive role in encouraging pro-biodiversity
business ventures. They are the ones who can make targeted individual loans available on the
basis of the global loans that the larger financial institutions can provide. They are the ones who
will examine the feasibility of all investment proposals received, and who are able to obtain and
process the personal details for assessing the creditworthiness of potential investors.
3.2 Social Issues Facing Maybank
1. Human Capital Development
This is vitally important for the future development and growth of the financial sector. Going
forward into the future this will become the pivotal factor determining the capacity to reinvent
and transform.
2. Employee Engagement Issue
Employee engagement is a management concept that determines how involved and
enthusiastic an employee is on his work that he creates a positive influence on his co-workers
that would further enhance the interest of their workplace (Mun, Suhaimi, Abdullah, Rahman, &
Mat, 2013).
At a time when companies are relying on their workforces to achieve growth, a major new
survey has found that only one in seven employees worldwide are fully engaged with their jobs
and willing to go the extra mile for their companies (Management-Issues.com, n.d.). Therefore

this problem needs to be addressed urgently in order to cope with the uncertainty of turbulent
industry condition.
3. Diversity & Inclusion Issues
Community Business (2014) defines inclusion as creating a workplace environment free
from prejudice and discrimination so that all regardless of gender, culture, religion, age, sexual
orientation or gender identity, can contribute their full potential.
Strategies that are aimed towards consumer outreach and promoting financial inclusion will
serve to increase access to financial services for all segments of society, promote more balanced
growth, while at the same time, providing new sources of revenue for the financial industry.
4. Safety, Health and Well-Being
Under Occupational Safety and Health Act 1994, employers are responsible for ensuring
health and safety in the workplace.1 Breach of which make employer liable to a fine not
exceeding fifty thousand ringgit or to imprisonment for a term not exceeding two years or to
both.2 Managing the risks to health and wellbeing is therefore an important issue for financial
institutions.
5. Social Justice Issues
Inter-Social Treatment involves treatment of a group(s) of people within the local and
regional scale. The basis for this unequal treatment is usually due to a personal belief about that
group(s):

1 S. 15(1)
2 S. 19

Heterosexis
m

Racism

InterSocial
Treatm
ent
Sexism

Ageism