Cross-border haze from forest and land fires in Indonesia is not\nmerely a domestic environmental problem. When the smoke travels across\nnational borders, people in neighbouring countries, including Singapore,\nare also affected. The issue connects the two countries: Indonesia is\nresponsible for controlling fires, while Singapore has an interest in\nprotecting public health and air quality.<\/p>\n
In 2014, Singapore enacted the Transboundary Haze Pollution Act\n(THPA), which allows action against entities whose conduct causes or\ncontributes to haze pollution in Singapore, including when that conduct\ntakes place outside the country. The Act also provides for civil\nliability and empowers the government to require relevant parties to\ntake preventive measures.<\/p>\n
One important feature of the THPA is its reach into corporate\nmanagement relationships. Section 5 covers not only entities that cause\npollution, but also entities that participate in the management of a\ncompany owning or controlling land outside Singapore, provided the\nrelevant legal requirements are met. Cross-border corporate structures\ntherefore do not automatically eliminate the possibility of\naccountability.<\/p>\n
However, the Act is not grounds for assuming that every plantation\ncompany operating in Indonesia is responsible for haze in Singapore.\nEnforcement still requires proof of the relevant legal elements.\nConcessions, hotspots, the movement of smoke, managers\u2019 conduct and\nrelationships between businesses must all be examined against the\nevidence.<\/p>\n
This is where the THPA matters. It shows that Singapore does not\nregard haze solely as a problem for Indonesia to resolve. Singapore has\nestablished a legal instrument to reach conduct outside its borders when\nits effects meet the requirements of Singapore law.<\/p>\n
But having such a legal instrument is only one part of the issue. Its\neffectiveness also depends on the ability to identify those responsible,\ngather evidence, trace corporate structures and ensure that legal action\nleads to changes in behaviour.<\/p>\n
Singapore as a Sustainable Finance Centre<\/strong><\/p>\n Singapore is not only a country affected by haze. It is also a\nregional financial centre connecting companies with banks, institutional\ninvestors, asset managers, capital markets and other financial service\nproviders.<\/p>\n This position makes Singapore relevant to discussions about financing\nfor plantations, forestry and land use in Indonesia. Companies\ndeveloping concessions, building processing facilities, purchasing raw\nmaterials or trading commodities need capital. That capital can come\nfrom various countries and flow through financing structures that are\nnot always easy for the public to trace.<\/p>\n In 2019, a Forests & Finance investigation cited by The Peak\nmagazine reported that 17 business groups linked to forest and peatland\nfires in Indonesia received at least US$19.2 billion in corporate loans\nand underwriting facilities between January 2015 and August 2019.\nSingapore-based financial institutions contributed about US$1.4 billion\nof that financing.<\/p>\n Those figures are historical findings relating to the business groups\nand period examined. They do not prove that all the financing was used\nto start fires, or that the Singaporean financial institutions named\ndirectly financed every concession-holding company subsequently\nscrutinised by regulators.<\/p>\n Even so, the findings show that forest fires cannot be understood\nsolely by examining companies\u2019 activities on the ground. The\nrelationship between business operations and their sources of capital\nalso needs to be examined.<\/p>\n Singapore, meanwhile, has developed policies to strengthen its\nsustainable-finance ecosystem. The Monetary Authority of Singapore (MAS)\nhas issued environmental risk management guidelines for financial\ninstitutions, including banks and asset managers. The guidelines cover\ngovernance, strategy, risk management and disclosure of environmental\nrisks. In March 2026, MAS also issued supplementary guidance on\ntransition planning for financial institutions. These policies at least\ndemonstrate that environmental risks are recognised as part of\nfinancial-sector risk management. Ecosystem damage can affect\nproductivity, operational continuity, compliance costs, corporate\nreputation and borrowers\u2019 ability to repay loans.<\/p>\n However, recognising that environmental damage poses a financial risk\nis different from ensuring that capital does not support activities that\ncause such damage.<\/p>\n The first approach primarily protects the resilience of financial\ninstitutions and their investments. The second requires scrutiny of the\nimpact of the economic activities being financed, including the origins\nof raw materials, land-management practices, fire prevention and\nfollow-up action in response to proven environmental violations.<\/p>\n The two approaches can complement one another. A company may be\nassessed as facing financial risks from fires without its contribution\nto environmental damage being adequately evaluated. Conversely, a\ncompany may continue to obtain financing when the ecological impact of\nits activities has not been fully reflected in credit-risk\nassessments.<\/p>\n For this reason, the credibility of sustainable finance cannot be\nmeasured solely by the number of green financial products or investments\nin low-carbon technology. Assessment must also consider how financial\ninstitutions deal with clients and investees facing risks of\ndeforestation, peatland damage or forest and land fires.<\/p>\n Who Is Responsible When Capital Finances a Risky\nBusiness?<\/strong><\/p>\n The issue becomes more complex when a concession-holding company is\npart of a wider business network. Companies in the same group may have\ninterconnected shareholders, directors, suppliers, commercial\nrelationships or sources of financing.<\/p>\n An article published by The Peak on 17 October 2026 raised this issue\nin connection with the National Environment Agency\u2019s (NEA) issuance of\nPreventive Measures Notices to seven Indonesian companies on 16 October\n2026. The notices concerned indications that smoke from fires on the\ncompanies\u2019 concession land might be moving towards Singapore. NEA\nrequested preventive and fire-control measures.<\/p>\n Two companies on the list, PT Bumi Mekar Hijau and PT SBA Wood\nIndustries, were also discussed in a 2018 investigation by Auriga\nNusantara into the ownership and management structures of wood suppliers\ndescribed by Asia Pulp & Paper (APP) as independent. The\ninvestigation found significant operational links between a number of\nsuppliers and the Sinar Mas business group.<\/p>\n Those historical findings are relevant as leads for further\ninvestigation, but do not in themselves establish current ownership\nstructures or legal responsibility for the fires that concerned NEA in\n2026.<\/p>\n This distinction matters when tracing capital flows. Establishing\nwhether investment originating in Singapore is genuinely connected to\ncompanies suspected of involvement in fires requires verifiable\ninformation about the investor\u2019s identity, the recipient of the funds,\nthe type and timing of the transaction, the intended use of the money,\nand the companies\u2019 ownership and control structures.<\/p>\n Without such information, a business group\u2019s links to Singapore\nindicate a possible economic connection, not proof that a particular\nbank or investor financed arson.<\/p>\n Nevertheless, financial institutions need not wait for a court ruling\nbefore conducting environmental risk assessments of prospective\nborrowers or companies in their portfolios. Due diligence can cover fire\nrecords, compliance with environmental obligations, disclosure of\nownership, supplier oversight and the implementation of corrective\nmeasures.<\/p>\n If serious risks are identified, financial institutions can demand\nimprovements, impose tighter financing conditions, increase monitoring\nor take other steps in accordance with their contracts and applicable\nrules. Such measures can prevent capital from continuing to flow without\nadequate scrutiny of the environmental impact of the financed\nactivities.<\/p>\n Testing the Consistency of Singapore\u2019s Policies<\/strong><\/p>\n Singapore\u2019s challenge is not only to invoke the THPA when haze\nreaches its territory. The next challenge is to link environmental\nenforcement policy with oversight of environmental risks in its\nfinancial system.<\/p>\n These two areas serve different functions. The THPA provides a legal\nbasis for addressing conduct that causes or contributes to haze\npollution in Singapore, subject to the statutory conditions and\nevidentiary mechanisms. Sustainable-finance policies, meanwhile, guide\nfinancial institutions in identifying and managing environmental risks\nin their business activities.<\/p>\n It would be wrong to assign legal responsibility for fires directly\nto every bank or investor with a connection to a business group. But it\nwould also be wrong to treat investment links as irrelevant when tracing\nhow high-risk activities obtain capital.<\/p>\n Policy consistency can be assessed through more concrete questions.\nDo financial institutions examine companies\u2019 environmental records\nbefore providing financing? Do information about fires and deforestation\naffect investment decisions? Are companies that repeatedly fail to\ncontrol fires required to improve their operational practices? Does\nmonitoring cover suppliers and related entities, rather than only the\ncompany that directly signs the financing agreement?<\/p>\n These questions can be answered through due-diligence policies,\nsustainability reports, risk disclosures, transaction data and concrete\naction towards problematic clients or investees.<\/p>\n For Indonesia, transparency over concession holders, beneficial\nowners, company directors, suppliers and sources of finance is also\nimportant. Traceable data would enable the government, civil society,\ninvestors and financial institutions to link fire incidents to relevant\nbusiness structures without making allegations based merely on proximity\nor affiliation.<\/p>\n Sustainable Finance Must Include Responsibility for\nCapital<\/strong><\/p>\n Singapore has established two policy instruments relevant to the haze\nproblem: a law that reaches cross-border pollution and a framework for\nenvironmental risk management in the financial sector. The question is\nhow consistently these instruments are applied to business networks\noperating across national borders.<\/p>\n Success in addressing haze should not be measured solely by the\nability to extinguish fires or issue notices to companies suspected of\nbeing connected to them. It should also take account of the economic\nfactors that allow high-risk activities to continue, including access to\ncredit, investment and trade finance.<\/p>\n In this context, Singapore can strengthen transparency around\nenvironmental risks in financing, encourage due diligence on companies\nexposed to deforestation risks, and ensure that financial institutions\u2019\nsustainability commitments are reflected in their business decisions.\nScrutiny must be evidence-based and proportionate, and must respect the\ndistinction between indications, administrative findings and wrongdoing\nproven in law.<\/p>\n For Indonesia, tracing capital flows can complement enforcement\nagainst those who start fires and other parties liable under national\nlaw. But such tracing must be based on corporate documents, ownership\ndata, financing transactions and verifiable evidence from the field.<\/p>\n Ultimately, haze shows that the effects of economic activity do not\nalways stop at national borders, while capital can move through networks\nfar more complex than concession boundaries on a map.\nSustainable-finance commitments should therefore be tested not only by\ninvestments labelled green, but also by transparency and accountability\nfor the business activities receiving capital support.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/smoke-crosses-borders-capital-flows-without-limits-1792399824",
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"sponsor": "Okusi Associates",
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