DBS sees opportunities in climate adaptation and nature; on track to cut financed emissions of most sectors
Lender’s sustainability report discloses that 15% of management’s remuneration is tied to ESG matters
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[SINGAPORE] South-east Asia’s largest lender DBS has identified climate adaptation as a medium to long-term business opportunity in its latest sustainability report released on Monday (Mar 9).
The bank noted that mobilising capital towards adaptation has become critical, alongside mitigation efforts, with the world reaching climate thresholds.
DBS’ chief sustainability officer Helge Muenkel said at a media briefing that climate adaptation is becoming a key area of focus and that the bank will be making some announcements in this area this year.
The sustainability report – the first that is aligned with International Sustainability Standards Board (ISSB) recommendations after the new disclosure requirement came into effect for Straits Times Index constituents – also stated that the bank was exploring nature-related financing, as it recognises the substantial economic value that a nature-positive future presents.
While DBS has incorporated climate adaptation and nature considerations into some of its previous transactions, this is the first time the bank has stated that it is looking at these two nascent areas of financing as business opportunities over the medium-to-long term.
Climate adaptation refers to measures aimed at helping society prepare better for, and reduce vulnerabilities to, climate impacts.
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It has often been seen as the poorer cousin of climate mitigation, especially among the private sector, as mitigation projects, such as renewables, have business models that have proven to be commercially viable. Adaptation projects, such as coastal defences, however, are typically seen as non-revenue-generating.
The volumes of nature-related financing, which refers to capital flows aligned with protecting and restoring natural ecosystems, are also low, due to challenges in data standardisation in biodiversity, as well as inadequate policy and regulatory support.
However, the bankability of adaptation projects can be improved when adaptation measures are embedded in infrastructure projects.
Muenkel gave an example of how renewable projects already have requirements for heat resistance.
“They have ways around this. For example, you can have hybrid projects, projects that are adaptation and mitigation. Or other structuring aspects. So there is going to be a huge part for the private sector to play,” he said.
The 2025 sustainability report also provided an update on the bank’s net-zero progress.
Portfolio emissions reductions for five sectors it has set decarbonisation targets for – power, oil and gas, automotive, aviation and real restate – were on track.
As with previous years, the steel and shipping sectors were off course.
Excluding loan repayments, DBS has committed a cumulative sum of S$102 billion in sustainable financing as at the end of last year. It also facilitated S$41 billion in sustainable bond issuances in 2025.
Under the new ISSB requirements, DBS also disclosed – for the first time – that 15 per cent of a scorecard used to measure compensation for its management was tied to ESG matters.
Transition finance
Out of the S$102 billion, only a small portion are transition-labelled loans, which refer to instruments where the proceeds are used to finance the decarbonisation efforts of carbon-intensive companies.
DBS declined to disclose the exact amount or proportion of such loans, though Muenkel said the number of such deals completed in the past year was “in the single digits”.
The bank updated its transition finance framework last year to expand the scope of economic activities eligible for transition financing, as well as strengthen governance around the use of the “transition” label.
While the number of transition loans are small, Muenkel said the pipeline of deals was growing, and he expects an increase in such transactions this year.
“This is now slowly getting momentum. If I simply look at the proposals we are now getting in, clients and relationship managers are getting excited about this,” he added.
Power sector
Financed emissions from the power sector in 2025 came in at 167 kg of carbon dioxide per megawatt hour (kgCO2/MWh), down from 208 kgCO2/MWh in the previous year, as the bank continued its shift towards cleaner technologies.
Renewable energy players now make up 63 per cent of the bank’s portfolio, up from 62 per cent previously.
However, countries in Asia remain reliant on natural gas and coal to ensure energy system resilience, especially amid heightened energy security and energy affordability concerns.
“This leads to the postponement of coal plant retirements, further exacerbated with repowering decommissioned facilities to address surging energy demand,” read the report.
DBS previously stated that it was looking to participate in the early shutdown of coal-fired power plants, and had been serving as the financial adviser to sovereign wealth fund Indonesia Investment Authority on what could potentially be the country’s first such transaction, involving the Cirebon-1 coal plant.
The country’s state-owned utility company PLN recently announced it was scrapping plans to bring forward the shutdown of the plant, citing extremely high costs.
When asked about DBS’ appetite for such transactions given Indonesia’s policy U-turn, Muenkel said the bank was still committed to coal phase-out, and is engaged in a pilot transaction with a Philippine coal plant by the South Luzon Thermal Energy Corporation.
The pilot is exploring the use of transition credits – a new type of carbon credit that is generated when a coal plant is retired early and replaced by renewables – in improving the commercial viability of coal phase-out transactions.
“These things are hard... And unfortunately, it’s an ecosystem play. If individual players want to do that, it’s fine. But the government needs to be okay, the policymakers need to be okay. Sometimes it’s even the regional municipality...
“We remain absolutely committed to the basic idea. There are no mandates to shut them down... We have to do something about it, and only because it’s hard, we’re not going to give up,” he added.
Oil and gas
Absolute financed emissions from oil and gas fell to 20.4 million tonnes of carbon dioxide equivalent (CO2e) in 2025.
The bank has revised its methodology for this sector and recalculated its baseline, as well as its 2030 and 2050 targets. So it cannot be compared with the 2024’s portfolio emissions.
DBS is on track to meet its 2030 target for the sector, as the lender continues aligning its financing to prioritise lower-carbon initiatives, while reducing exposure to carbon-intensive borrowers across the oil and gas value chain, read the report.
Nonetheless, oil demand in Asia is expected to increase up to 40 per cent by 2040 as energy demand surges, as demand growth shifts from China towards India and South-east Asia.
It also noted that natural gas remains the practical transitional fuel, with liquefied natural gas imports expected to rise over the next decade, with South-east Asia potentially moving from being a net exporter to a net importer by 2030.
Aviation
The emission intensity for the aviation sector saw a slight uptick to 0.84 kg of CO2 per passenger-kilometre for 2025, though it remains on track to meet the bank’s target.
Nonetheless, DBS noted that many of its clients already operate relatively efficient fleets, and future challenges to decarbonise may arise due to the limited availability of sustainable aviation fuel.
Steel and shipping
Like in previous years, steel and shipping continued to be laggards.
The weighted emissions intensity of DBS’ shipping portfolio was 24.1 per cent above the 2025 recommended target. Though lower than 2024’s 28 per cent, it still underperformed relative to the sector’s decarbonisation pathway, which has been revised to the International Maritime Organization’s 2023 net-zero trajectory.
The bank said this was due primarily to the financing of shuttle tankers, which was committed before setting these decarbonisation targets. Excluding these shuttle tankers, the sector’s emissions intensity would have gone down by between 9 and 10 per cent.
“The shipping industry faces challenges in reducing reliance on oil-based fuels, compounded by high costs, limited supply and operational constraints. As decarbonisation targets accelerate against the reference pathway, meeting the targets will remain challenging in the absence of strong policy and technology drivers,” read the report.
As for steel, emissions intensity came in at 2.16 kg of CO2e per kg.
As with the oil and gas sector, the portfolio emissions for steel cannot be compared with 2024, as the bank has shifted from a global reference pathway to a regional one for the sector, and recalculated its baseline and targets.
The shift was made to better reflect the distinct challenges of the lender’s Asia-focused portfolio, and is aligned with the complexities and pace of the region’s steel-sector transition.
The sector remains off track due to DBS’ substantial exposure to Indian and Chinese steelmakers – which predominantly use carbon-intensive blast furnaces – and significantly limit the pace of decarbonisation in the bank’s portfolio.
“The entrenched technological and policy barriers facing the sector make it difficult for banks alone to drive the sector’s transition,” read the report.
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