DBS adjusts coal financing policy to include early retirement of coal plants

SOUTH-EAST Asia’s largest lender DBS has adjusted its coverage to accommodate the financing of the early shutdown of coal-fired energy vegetation, and is already engaged on a deal, stated its chief sustainability officer Helge Muenkel.

He stated on Tuesday (Mar 5) that the choice to tweak its inner coverage happened over the previous few months to align with shifts within the wider monetary sector, which has been pushing to ramp up transition finance within the coal house.

Transition finance refers to capital that can faciliate the decarbonisation of carbon-intensive corporations.

The launch of two Asia-based taxonomies that accommodated early coal phase-out as amongst one of many eligible actions that qualify for sustainable financing displays the business’s softening strategy in the direction of coal, although with parameters and circumstances hooked up.

DBS additionally labored with the Asia-Pacific chapter of the Glasgow Financial Alliance for Net Zero (GFanz) – a worldwide coalition of economic establishments – on a set of voluntary pointers on how early coal retirement may be funded in a reputable method.

This has offered banks with extra confidence to take part in early coal retirement, an exercise that might have in any other case garnered heavy criticism amid rising worldwide stress on banks to chop financing for fossil fuels to curb world warming.

“We wanted to do this properly,” stated Muenkel. And when one works with GFanz, there may be an outreach to authorities regulators such because the MAS, he added.

“Because we can’t do this alone, this is why we did (it) step-by-step to be aligned with the ecosystem,” stated Muenkel.

DBS’ prior coal financing restrictions will stay. The financial institution will nonetheless not finance any new thermal coal-mining initiatives and its plans to regularly cut back thermal coal publicity remains to be in place.

When requested how the financial institution could be reporting financed emissions arising from early coal retirement, Muenkel stated there may be at present no business consensus on this but, although he wouldn’t thoughts separating future publicity to early coal retirement from its current thermal coal financing as each are “very different types of exposure”.

But regardless of the business decides on, he stated that the financial institution will probably be clear about any early coal retirement offers it funds.

This signifies that DBS’ financed emissions within the energy sector might go even greater over the subsequent few years with this alteration in coverage.

The financial institution’s financed emissions for the ability sector has gone up in 2023 in comparison with 2022, in accordance with its newest sustainability report launched on Wednesday (Mar 6). But DBS stated that it’s nonetheless on monitor to fulfill its decarbonisation objectives within the energy sector, as the rise is a results of increasing the scope of its power-sector purchasers to incorporate important energy and utility gamers that contribute to power safety in Asia-Pacific.

Its publicity to thermal coal has additionally declined to S$1.8 billion in 2023, in comparison with S$2.2 billion within the earlier yr, whereas its renewable power financing has elevated to S$10 billion from S$7 billion over the identical interval. Muenkel famous that renewable power financing is about half of its energy portfolio.

The financial institution’s absolute financed emissions for the oil and fuel sector has gone right down to 26.2 tonnes of carbon dioxide equal in 2023, in comparison with 28.9 tonnes from the yr earlier than. Its excellent publicity to all the in-scope oil and fuel portfolio has decreased by about 10 per cent, placing the financial institution on monitor to attain its goal of a 28 per cent lower by the tip of the last decade. 

DBS additionally stated that additionally it is on monitor to fulfill the decarbonisation objectives of its actual property, automotive and aviation sectors. Similar to the earlier net-zero replace offered in March 2023, metal and transport proceed to be the sectors that haven’t been capable of decarbonise at tempo with the business’s net-zero reference pathways.

For the transport sector, the weighted emissions depth of its transport portfolio was 15.6 per cent above the beneficial goal in 2023, greater than 5.4 per cent the earlier yr, which displays a widening from its discount trajectory.

The financial institution added this was primarily as a consequence of extra drawdowns on services used to finance shuttle tankers, which had been services already dedicated earlier than the financial institution set its sectoral decarbonisation targets in September 2022.

As for metal, the emissions depth improved to 1.95, in comparison with 1.99 within the earlier yr. Despite the development, it’s nonetheless above the reference goal of 1.83 from the Mission Possible Partnership’s Tech Moratorium state of affairs. DBS’ goal is to decrease this to 1.42 by 2030.

“The actual pace of decarbonisation in the steel sector is slower than anticipated and we will need to strike a balance between honouring our existing commitments to clients and approaching our net zero goal,” learn the report.