OCBC cuts 2023 financed emissions in most ‘dirty’ sectors except steel and aviation
The lender set net-zero targets for the segments in May 2023
[SINGAPORE] OCBC’s financed emissions for four carbon-intensive sectors – power, oil and gas, real estate and shipping – declined in 2023, compared with the previous year.
However, portfolio emissions for the aviation sector remained the same, while that of the steel sector went up.
In its 2024 sustainability report released on Wednesday (Mar 26), South-east Asia’s second-largest bank gave its annual update on the decarbonisation progress of the six sectors that it had set net-zero targets for. The segments make up about 67 per cent of the lender’s corporate and commercial banking loan portfolio.
Besides setting the targets in May 2023, OCBC noted then that it will stop financing upstream oil and gas projects approved after 2021. It also made a commitment in 2019 to cease the financing of new coal-fired power plants.
Steel and shipping
OCBC’s 2023 financed emissions for the steel sector came in at 1.91 tonnes of carbon dioxide equivalent for every tonne of steel, up from 1.76 tCO2e/tSteel in the previous year.
This, however, was still lower than the 2021 baseline of 1.93 tCO2e/tSteel.
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Despite the year-on-year uptick in emissions, OCBC said that the decarbonisation journey is not linear. It noted that the overall steel portfolio was still below the industry’s pathway towards reaching net-zero.
The increase in the sector’s emissions intensity is mainly because of its expanded portfolio, with more growth from steel producers in China, which tend to be more carbon intensive on average. This is due to their dominant use of blast furnace-basic oxygen furnace production methods.
Data coverage remains low, with only a few steel companies in the bank’s portfolio publicly reporting actual emissions intensity data, it added.
As for shipping, the weighted emission intensities across different vessel types improved to 4.6 per cent, compared with 11.2 per cent in the previous year. However, it is still not in line with the net-zero pathway set by the International Maritime Organization.
Under this metric, a negative figure indicates that portfolio emissions are lower than the industry reference pathway.
Nevertheless, OCBC said that this was still a “substantial improvement”. It attributed this to its customers investing in newer and cleaner ships, in addition to optimising their existing fleets.
The report noted that among those committed to the Poseidon Principles – an international disclosure framework for financial institutions’ shipping portfolios – only one bank was below the reference pathway; OCBC was the third-lowest among its global peers.
“We expect to remain above the reference pathway in the near future due to industry-wide challenges such as the lack of commercially viable and technologically feasible alternative fuels,” read the report.
The decarbonisation of the steel and shipping sectors has been a common challenge across all three local banks. DBS and UOB have also reported an increase in their financed emissions from either one or both of these sectors in their respective annual updates.
Aviation
Financed emissions for aviation in 2023 remained the same, at 0.097 kg of carbon dioxide equivalent per passenger travelling 1 km.
However, its emissions intensities were lower than the sector’s net-zero pathway; OCBC remains on track to achieve its 2030 target.
The improvement from OCBC’s 2021 baseline year is attributed to the continued normalisation of air travel with the number of passengers returning to pre-Covid levels, as well as its customers procuring newer fleets that are more fuel efficient.
The lender said that it remains aware of the sector’s decarbonisation challenges, especially with production volumes of sustainable aviation fuel remaining below demand.
Power
Portfolio emissions from the power sector continued its decline to 301 kg of carbon dioxide equivalent for every megawatt-hour.
The report said this was 24 per cent below the net-zero pathway set by the International Energy Agency, putting the bank on track to meet its 2030 target.
OCBC noted this was due to its clients’ efforts to increase the energy efficiency of their new and existing plants, as well as the scaling up of renewable energy deployment.
Oil and gas
As with the power sector, the portfolio emissions for oil and gas extended its fall to 11.2 million tonnes of carbon dioxide equivalent in 2023, from 12.1 million tonnes in the previous year.
The lender said: “While this is good progress, we recognise the challenges ahead, particularly with the continued global reliance on oil and gas as a vital energy source. “We acknowledge that gas will remain a transitional fuel for countries such as Singapore, where renewable energy potential is limited, as well as a transitional energy source in sectors such as shipping.”
OCBC added that the transition of the sector remains complex, given the need to balance different priorities. This includes energy security and resilience, meeting rising demand for energy in emerging economies and addressing infrastructure bottlenecks, while expanding clean energy supply.
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