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DBS to cease financing of new coal power plants
DBS Bank has decided to cease financing new coal-fired power plants in any market, after honouring existing commitments, the second Singapore bank to do so.
South-east Asia's largest bank is also stepping up financing of renewable energy projects.
DBS' latest move is an about-turn from an earlier policy of financing new coal power plants with strict emissions controls, citing the need for a transition period in some parts of Asia, and comes after OCBC Bank said the financing of Vietnam coal power plants will be its last.
In a statement on Thursday, DBS said in February 2018, it issued a statement on its approach towards financing coal-fired power plants (CFPP) and thermal coal mining.
"We have since been monitoring market developments and have also had regular dialogue with stakeholders about the role DBS should play in supporting sustainable development," it said.
"Specifically, we noted the World Energy Outlook 2018, released in November 2018 by the International Energy Agency (IEA), which outlines a Sustainable Development Scenario (SDS) for energy. We also studied the Intergovernmental Panel on Climate Change (IPCC) SR15 when it came out in October 2018."
Both reports are unequivocal in the need to urgently tackle climate change, said DBS.
However, the reports also confirmed that in some parts of Asia, there will need to be a transition period. This is reflected in the forecast coal-fired power capacities in the IEA report and the comment in SR15 that in most 1.5-degree consistent pathways, investments in unabated coal generation is projected to halt only by 2030.
"Given these considerations, we have decided to cease financing new CFPP in any market regardless of the efficiency of technologies used, after honouring our existing commitments," said DBS.
"The last of these existing commitments is likely to be completed by 2021. This aligns our financing policy for CFPP with a trajectory that is more ambitious than the SDS and the pathways described in IPCC SR15.
"We continue to pursue renewable projects. In 2018, we had 17 such deals mandated or closed with estimated loan size of over S$1.3 billion," it added.
On Tuesday, OCBC Bank said two Vietnamese coal-fired power plants will be the last it finances as it increases funding for renewable projects, according to a Bloomberg report.
"We won't do any new coal-fired power generation plants in any country, except for the power projects that we are already in, or we have committed to," OCBC chief executive officer Samuel Tsien said.
"We hope that by doing this, we are encouraging the governments to do facilitating, arrangements for the countries to move from coal to renewable," he added.
DBS, in earlier reports, is also said to be a lender to the Vietnam coal projects.
United Overseas Bank told The Business Times on Thursday that it continues to support higher efficiency and lower emission coal plants.
Eric Lim, UOB head of group finance and chairperson of the environmental, social and governance committee, said the bank is committed to working with clients in contributing to the sustainable development of local communities and economies.
"As such, even as we recognise the need for coal in meeting the region's energy needs, we prohibit new financing of subcritical coal-fired power plant projects. We only support higher efficiency, lower emission coal-fired power plants with maximum carbon intensity of 830 grammes of carbon dioxide per kilowatt hour. To mitigate the environmental impact, we require our clients to comply with our stringent technological requirements and emission standards, and encourage their use of appropriate adoption of innovative technology," he said.
"We review our responsible financing policy on an ongoing basis with this intent in mind," Mr Lim added.