According to DBS’s 2023 sustainability report, released on March 6, the steel and shipping sectors remain “hard-to-abate”, and addressing these sectors will need “broader ecosystem partnerships” from the public and private sectors.
DBS’s sustainable financing commitments, net of repayments, stood at about $70 billion as at Dec 31, 2023, up from $51 billion the year prior.
The share of sustainable finance relative to loans issued by DBS’s institutional banking group also rose, says Helge Muenkel, chief sustainability officer at DBS. “It’s not just the absolute amount of lending, but the relative size in terms of our total book. So, if you put it differently, we’re greening our book more and more.”
See also: Retiring coal-fired power plants is the 'mother of all transitions': MAS
Speaking to the media on March 5, Muenkel says the bank facilitated close to $18 billion of ESG bond issuances last year. This includes green, social, sustainable and sustainability-linked (GSSS) bonds.
This was down from some $24 billion in ESG bonds issued in 2022, as the capital markets were generally muted last year, says DBS.
Most of the ESG bonds issued in 2023 were in the form of green and sustainable bonds. Some notable issuances include a RMB800 million green bond by China Power International Limited in February 2023, and a Singapore dollar-denominated green bond issued by CapitaLand Integrated Commercial Trust (CICT) in June 2023.
See also: MAS launches Singapore-Asia Taxonomy, world's first to include 'transition' category
Coal policy
DBS’s commitment to remove thermal coal from its book by 2039 is “simply based on one exposure”, says Muenkel. The bank had legally committed to the grandfather deal prior to making the pledge in 2021.
“It’s certainly not that I want to do coal until 2039; it’s [because] what I’ve committed to will only run out by 2039,” says Lim Wee Seng, group head of energy, renewables and infrastructure at DBS.
While Lim declined to reveal the value of the thermal coal deal that is set to expire in 2039, he says it is “materially smaller” than the current $1.8 billion portfolio figure.
The bank has also updated its coal policy to align with regional taxonomies on the managed phase-out of coal, following two developments last year.
The first is the Asean Taxonomy Board’s announcement in March 2023, which determined that projects phasing out coal can obtain transition financing, marking a first for any regional taxonomy.
The second is the Singapore-Asia Taxonomy for Sustainable Finance, which the Monetary Authority of Singapore (MAS) launched at COP28 in December 2023.
See also: MAS launches coalition, two pilots to test 'transition credits' for early retirement of coal plants
It is the world’s first taxonomy to pioneer the concept of a “transition” category, and it provides a credible framework to phase out coal-fired power plants. These plants must be phased out by 2040 and operate for less than 25 years, among other criteria.
DBS also joined MAS’s Transition Credits Coalition (Traction) to study the use of “high-integrity transition credits” to incentivise the early retirement of coal-fired power plants.
“We expect to participate in more such transactions in the future and will continue to help our clients establish their transition strategies,” says DBS.
Steel and shipping lagging
According to the report, DBS says it observed “good” emissions reductions in five of the seven sectors that bear decarbonisation targets. They are the power, oil and gas, real estate, aviation and automotive sectors.
DBS says it has “significantly” scaled up renewables financing, which now represents about half of its power portfolio. Within this portfolio, emissions intensity remains “on track”, even with an expansion of in-scope customers.
Within oil and gas, DBS’s absolute financed emissions continued to decline in 2023 with a 10% reduction compared to 2022. “This was due to several factors, including a deliberate reduction in business activities and lower drawdowns,” says the bank.
While DBS’s emissions intensity within its steel portfolio improved y-o-y, it remains “marginally above” the reference scenario. DBS’s 2050 target is to bring the emissions intensity of its steel portfolio down some 93% from a 2020 baseline to some 0.14 kilograms of carbon dioxide equivalent per kilogram of crude steel produced (kgCO2e/kg).
“Improvements were due to financing the use of more efficient iron ore processing technologies and recycling scrap,” says DBS. “Clients also explored the use of alternative technologies including carbon capture, utilisation and storage, which may lead to financing opportunities in the future.”
Meanwhile, the bank is “not on track” to meet its targets for its shipping portfolio. DBS blames “additional drawdowns” on facilities used to finance shuttle tankers, but these facilities were committed prior to DBS setting its sectoral decarbonisation targets and were not new transactions.
DBS’s 2050 plans for its loans to this sector is an alignment delta of below 0%. The alignment delta measures how DBS’s clients compare to a range of diverse underlying benchmarks.
The bank says it will engage its clients to facilitate the adoption of lower-carbon technologies and alternative fuels, and direct financing towards more efficient vessels.
Photo: Albert Chua/The Edge Singapore
