OCBC working to amend coal policy to finance early retirement projects

Southeast Asia’s second-largest lender is likely to join rival DBS in backing a managed coal phase-out in line with the Singapore-Asia Taxonomy’s criteria. But it remains unclear if the updated coal policy will be 1.5°C-aligned.

OCBC Bank branch in Georgetown, Malaysia
Singapore lender OCBC will soon join DBS in amending its coal policy to allow the financing of early coal retirement, leaving UOB the only bank in the city-state that has yet to publicly comment on whether it plans to do the same. Image:  via Flickr, CC BY-NC 2.0.

Southeast Asia’s second-largest bank OCBC is likely to join Singapore rival DBS in updating its coal policy to allow the financing of early coal phase-outs in line with criteria laid out in the city-state’s national taxonomy, which launched last December. 

The lender’s group chief sustainability officer (CSO) Mike Ng told Eco-Business in a written statement that the bank “will be looking to participate in coal phase-out projects through a revision of [its] coal financing policy”. 

“We remain committed to directing capital away from fossil fuel-based technologies toward technologies that facilitate the scaling up of clean and renewable energy and its supporting infrastructure, as well as other decarbonisation solutions,” said Ng, who was appointed the bank’s first CSO in July last year.

Eco-Business understands that the coal policy has not yet been amended, though an OCBC spokesperson reiterated that the bank is “presently working on revising [its] coal financing policy to align with the taxonomy’s criteria.”

Last month, DBS revealed that it has adjusted its coal policy to accommodate the financing of managed coal phase-out projects at a media briefing for its annual sustainability report. The lender also shared that it is already working on an early retirement deal. 

In response to Eco-Business queries on the time-frame for completely exiting coal, the OCBC spokesperson responded that its “prior committed exposure to coal-fired power plants and thermal coal mines will be phase out by 2040.” Both of its Singapore-based peers, DBS and UOB, have committed to do the same by 2039. 

OCBC’s existing coal financing commitments include the 1.2 gigawatt Nghi Son 2 plant in Vietnam, which began construction in 2018 and is expected to continue operating until 2043. This would fly in the face of the International Energy Authority (IEA)’s call to phase out all unabated coal generation by 2040 in order for the world to have a shot at limiting warming to 1.5 °C.

When asked if its current coal restrictions apply beyond project financing to general purpose corporate lending and capital markets facilitation – which critics have pointed out are loopholes that allow banks with exclusion policies to continue financing the polluting energy source – the bank confirmed that it does have restrictions in place for corporate lending.

The spokersperson told Eco-Business it does not finance clients with over half of their total revenue derived from coal-fired power plants or thermal coal mines. However, it is unclear if this extends to capital market facilitation, like bond underwriting.

Green hush among top Singapore banks?

OCBC’s latest sustainability report, published earlier today, showed that it is on track to meet all six sector-specific net-zero targets that it announced last May.

Since 2021, the lender has cut about 9 per cent of its financed emissions intensity in the power sector. The absolute financed emissions from its oil and gas portfolio also came down by 19 per cent in 2022, compared to the year before. The four other priority sectors – real estate, steel, aviation and shipping – have either outperformed or are in line with their reference trajectories.

However, unlike DBS, the bank did not hold a media briefing for its sustainability report this year. 

When asked about the reasons for this, a spokesperson told Eco-Business that the bank chose not to do so after extensive discussions given the positive progress they have made in meeting their decarbonisation targets and the fact that they are all detailed in the report.

Last month, Singapore-based peer UOB also released its most recent sustainability report without holding a media briefing, despite stating in the same report that the media is a stakeholder they regularly seek to engage through various means, including media briefings and conferences “as and when appropriate”.

Suzy Goulding, head of sustainability, Asia Pacific, Middle East & Africa for public relations firm MSL Group told Eco-Business that “it’s difficult to say whether this is greenhushing or not.”

The term “green hush” refers to the growing phenomenon where companies refrain from communicating their green credentials out of fear they will be called out for greenwashing.

“I don’t know enough about either banks’ approach to media relations, but with OCBC and UOB both making good progress on their targets, I would have expected a media briefing,” said Goulding.

“Of course this also depends on whether both banks have historically opted for this… Maybe they felt that there was nothing really new in the report that warranted a media briefing, as moving forward with their decarbonisation targets is now just ‘business as usual’ for them?”

UOB is similarly on track to meet its net zero targets for its six top polluting sectors in the past year, as outlined in its first progress report last October, where it remained between 7 to 14 per cent below the target reference pathways.

The lender also launched a new environmental, social and governance (ESG) risk monitoring system, dubbed the “ESG Adverse News Surveillance System”, which is meant to alert relevant relationship managers to clients hit by any adverse ESG news, so they can assess if there is any non-compliance with the bank’s policies.

In 2023, UOB extended S$19.5 billion (US$14.5 billion) in new sustainable financing to corporates, a comparable amount to the S$19 billion (US$14 billion) and S$14 billion (US$10.4 billion) that DBS and OCBC made over the same period. 

“Though we are just speculating here on why they both chose to quietly release their latest sustainability reports, I still think it is disappointing when companies don’t proactively communicate their progress – or otherwise  of their sustainability actions, whether due to the risk of greenwashing accusations or other reasons,” said Goulding. 

“Not only does this mean that they don’t benefit from the positive reputational impact to be had, but it also hinders companies in similar sectors from learning from each other, which is important if the business community wants to move forward collectively at a faster pace.”

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