UOB, CIMB vote for 1.5 deg C climate target to be replaced with below 2
DBS said Asia must craft its own decarbonisation pathway
[SINGAPORE] At least two banks in South-east Asia will be voting to drop a key climate target that limits global warming to 1.5 degree Celsius above pre-industrial levels.
Both UOB and CIMB – who are members of the Net-Zero Banking Alliance (NZBA) – told The Business Times that they will be accepting a proposal by the group to remove the requirement that signatories have to align their portfolios to the 1.5 deg C threshold. Their net-zero pledge will instead be replaced with a commitment to keep global warming to “well below 2 deg C”.
The vote comes as the climate group convened by the United Nations faces increasing pressure after a series of high-profile departures in recent months.
Instead of requiring all signatories to align their portfolios to the 1.5 deg C threshold, members will be offered greater flexibility to target their decarbonisation targets to the markets in which they operated, reported Bloomberg.
NZBA’s chair Shargiil Bashir told Bloomberg that the alliance is looking at how to respond to variations in the ambit of climate-related policy and regulation across countries and regions, and whether consideration should be given to regional differences in decarbonisation rates, as well as the widening gap between pathways aligned to 1.5 deg C and the real economy in many sectors and markets.
The challenge for South-east Asia to decarbonise is particularly challenging as the region – largely made up of emerging markets and developing economies – is still heavily reliant on fossil fuels, with the use of such fuel likely to continue to grow as energy demand is projected to increase along with economic growth.
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Responding to queries from BT, UOB’s chief sustainability officer Eric Lim said that the bank believes in a just transition for South-east Asia, where decarbonisation must take place while ensuring energy security as well as socio-economic equity and equality.
“This is so that we can help address potential trade-offs with real-life consequences,” he added.
Lim also said that UOB considered structural differences across the region when it set its net-zero targets, and used regional decarbonisation pathways for targets that represent fair contributions of its key markets.
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“We have stayed pragmatic, even as we are guided by the science in setting our net-zero targets and adopting internationally recognised climate models,” he added.
Luanne Sieh, chief sustainability officer of CIMB, said that the bank supports the proposal as it is “a positive step to keep climate efforts moving forward, while taking into account the diverse operating environments of its member banks”.
While DBS did not explicitly indicate how it is going to vote, a spokesperson told BT that “Asia must craft its own decarbonisation pathway... that is ambitious and firmly grounded in the region’s socio-economic realities”.
“Importantly, Asia-specific decarbonisation pathways do not necessarily mean slower decarbonisation. To accelerate climate action in Asia, new sources of capital – as well as innovation in decarbonisation technologies and in financing solutions – are needed,” added the spokesperson.
Maybank’s chief sustainability officer Shahril Azuar Jimin said that it is not able to comment on the vote, given that NZBA is still carrying out the strategic review.
He added that Maybank’s net-zero White Paper was designed to align with global climate goals – particularly the Paris Agreement’s target of limiting global warming to well below 2 deg C, and ideally to 1.5 deg C.
“The White Paper is structured around science-based targets, with a clear commitment to reducing financed emissions, supporting the transition of industries and promoting sustainable finance... Governmental plans and targets relevant to the sectors are covered in the White Paper,” he said.
OCBC, Standard Chartered, HSBC and ANZ – who are also current members of the NZBA – declined to comment.
JPMorgan Chase is the latest major bank from the United States to leave the climate alliance in January this year, after the exodus of five other Wall Street banks – Citigroup, Bank of America, Goldman Sachs, Wells Fargo and Morgan Stanley.
Major Japanese banks have also left the group one after another since the beginning of this year, with Sumitomo Mitsui Trust the only one remaining. Sumitomo Mitsui Financial, Nomura, Mizuho, MUFG and Norinchukin have all left.
These departures have cast doubts on the effectiveness of the climate alliance and banks’ commitment to their net-zero pledges.
Latest climate data from the European Union’s climate service showed that the world has breached the 1.5 deg C in 2024, raising questions on how banks can meet their net-zero targets as they have developed their decarbonisation pathways based on that north star.
DBS’ chief sustainability officer Helge Muenkel said previously that there needed to be an honest discussion around the increasingly challenging environment in which banks are operating, and whether the 1.5 deg C goal is still achievable or if a pathway just for Asia is needed.
A spokesman from DBS said that it continues to see value in alliances, including the NZBA that serves as platform for collective action towards achieving net-zero emissions, particularly in an Asian context.
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