DBS cuts financed emissions in key sectors, but misses decarbonisation targets for shipping, steel

DBS lowered the emissions that it finances in most key sectors in 2022, putting it mostly on track to meet its decarbonisation goals, according to the bank’s first sustainability report since announcing its net-zero targets in September 2022.

In the report released on Thursday (Mar 9), DBS also disclosed, amid intensifying scrutiny over banks’ green pledges and fossil fuel financing, that its exposure to thermal coal power has fallen to S$2.2 billion as at end-2022, from S$2.7 billion a year earlier.

Meanwhile, it reported a 7.8 per cent drop to its financed emissions for the oil and gas (O&G) sector to 35.6 metric tons of carbon dioxide equivalent in 2022, from 38.6 MtCO2e a year earlier, putting the bank on track to achieve its target of a 28 per cent cut by the end of the decade. 

As for the other sectors, which are guided by intensity targets rather than an absolute target, DBS said it stayed on track for four sectors – real estate, aviation, automotive and power – but missed the glide path targets it has set for shipping and steel.

DBS tracks the health of its financed emissions in the shipping sector by comparing each relevant financed vessel’s emissions intensity against the corresponding benchmark set by the International Maritime Organization (IMO). 

In 2022, the weighted emissions intensity of its shipping portfolio was 5.4 per cent above the recommended target, a reversal from achieving 11.8 per cent under the recommended target in 2020.

DBS attributed the underperformance to the addition of a small group of financed vessels that belong to a business segment with shorter trading routes. 

As for steel, the emissions intensity tied to its financing activities in the sector grew to 1.99, from a baseline of 1.95, missing the reference target of 1.85, taken from the Mission Possible Partnership’s Tech Moratorium scenario. DBS’ target is to lower this to 1.42 by 2030.

Queried if this means that the bank will have to be more stringent in its lending criteria in these two sectors, or seek more aligned clients moving forward, DBS chief sustainability officer Helge Muenkel told The Business Times that it is too early to draw conclusions for the long term. 

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Stressing that it has been less than six months since the interim 2030 decarbonisation targets were set, he said the focus in the period was on training employees and building environmental, social and governance (ESG) data architecture, among others.

It is rather “encouraging” to note that the majority of the shipping vessels financed by the bank perform better than their respective IMO benchmarks, and that the emissions intensity of its steel portfolio is “only very slightly” above the chosen glide path, he said.

Adding that decarbonisation in both these sectors requires medium- to long-term strategies, he said: “We need time to further engage with our customers, and remain committed to empowering them in their transition such that we meet our 2030 decarbonisation targets.”

Muenkel, meanwhile, reiterated that the exercise to track its progress across the various priority sectors is more than just risk management to the bank. 

“We see our support in tackling climate action as a business opportunity,” he said. “The investment and financing needs to transition our economies to net zero are very significant. We believe that we can create a lot of value by empowering our clients in their transition.”