A coalition of 16 Singaporean non-government organisations (NGOs) has issued an open letter urging the bosses of the country’s banks to end funding for coal power projects and to take leadership for sustainable development in Southeast Asia.
The letter was sent to the banks on Monday, the same day that Singapore hosted the Special Asean Ministerial Meeting on Climate Action for government officials from the 10-nation Southeast Asian bloc.
The coalition highlighted in the letter that financing new coal-fired power plants undermines the city-state’s commitments to the Paris Agreement on climate change in a year the city-state has dedicated to climate action.
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The group, which includes local NGOs such as People’s Movement to Stop Haze (PM Haze), Plastic-Lite Singapore, Foodscape Collective and Climate Conversations, described the recent backing by DBS Bank and OCBC Southeast Asia’s two largest banks—of a 1,200 megawatt coal plant in Vietnam as “disturbing”.
Stressing that burning coal for energy is the main driver of climate change, the coalition said that limiting global warming to below 2 degrees Celsius as set out in the Paris Agreement will require deep cuts in greenhouse gas emissions over the next 20 years.
Singapore’s banks play a key role in tackling climate change for the region, the coalition argued, pointing to the devastation wrought by climate calamities such as Typhoon Haiyan, which claimed over 10,000 victims and forced 1.9 million people to flee their homes.
Besides climate-related effects, the coalition stressed the direct health impacts of coal-fired energy production on local communities in the region. Burning coal releases pollutants such as mercury and lead-causing respiratory diseases, while toxic coal sludge produced by coal mines and plants pollutes water bodies, the group said.
The last thing we would want to see is our money being used in a way that accelerates climate change, thereby destroying the future of our loved ones.
Benjamin Tay, president, People’s Movement to Stop Haze
“Everyone in Southeast Asia should have access to affordable energy, and it need not come at the expense of their health and livelihood,” the coalition said, pointing to a sustainable development scenario for Southeast Asia that was proposed by the International Energy Agency (IEA).
IEA’s report predicts that a decline in coal power by 2025 as renewables gain prominence will result in universal electrification by 2030 while reducing premature deaths due to air pollution by 63 per cent, and saving US$176 billion a year from fossil fuel imports by 2040.
The coalition also expressed concern over the banks’ responsible lending policies.
“Ever since the Association of Banks in Singapore issued their guidelines for responsible financing in 2015, we have been eager to see how our banks will demonstrate leadership in using their financial might for good,” Benjamin Tay, president of PM Haze and spokesperson for the coalition, told Eco-Business.
“We were surprised by the news in April this year of DBS and OCBC agreeing to finance a coal power plant [in Vietnam],” he shared.
“The last thing we would want to see is our money being used in a way that accelerates climate change, thereby destroying the future of our loved ones,” he said.
It would be foolhardy to assume that the transition [from fossil fuels to renewable energy in Southeast Asia] can happen overnight.
Spokesperson, DBS Bank
How Singapore’s banks are responding
The letter from Singapore’s green groups comes five months after a collective of international NGOs, including those in major coal-producing countries Indonesia and Vietnam, published a similar open letter urging Singapore banks to ditch coal and follow the lead taken by some European banks such as ING, Commerzbank, Deutsche Bank and RBS.
In response to the local NGOs’ letter, OCBC—the region’s biggest coal lender, according to a report on Singapore banks’ coal lending activity by Australian NGO Market Forces released in January—pointed to a new climate policy it published a week ago.
The policy rules out financing coal-fired power plants that use low-efficiency subcritical technology and/or low-grade brown coal as the main fuel source.
OCBC’s head of group corporate communications, Koh Ching Ching, said in a statement that the bank is committed to responsible financing, and reviews environmental impact assessments before awarding loans and imposes “suitable covenants” that would lead its customers to adopt sustainable practices.
“We will continue to channel funds to support environmental investments, which will in turn spur economic and climate resiliency across our core markets,” she said.
OCBC’s new position on coal emerges five months after DBS became the first Asian bank to launch a climate policy, promising to stop financing new coal power projects—but only in developed markets.
DBS’s chief executive, Piyush Gupta, also promised in February to stop financing low-grade “dirty coal” by the end of this year.
Responding to the open letter, DBS told Eco-Business that while the bank is committed to taking a leadership role in promoting the transition to a low-carbon economy, “it would be foolhardy to assume that the transition can happen overnight”.
It pointed to the same IEA report highlighted by the NGO coalition, which predicts that coal will still account for 40 per cent of Southeast Asia’s energy mix by 2040.
The spokesperson explained that DBS’ financing framework is based on various factors, including the level of technological and economic development in different countries. It noted that grid capacity and tariff reform in developed markets present a mature environment for renewable energy that allows the bank to finance sustainable alternatives.
“In developing markets, we will pursue viable renewable projects, and at a minimum, direct our financing towards more efficient fossil-fuel-based technologies,” the spokesperson said.
UOB, Singapore’s third-largest bank and coal lender, echoed DBS’ position that while renewables are on the rise, coal will “still play a role in supporting the region’s economic development and empowering local communities.”
The bank’s head of group finance and chairperson of the environmental, social and governance committee, Eric Lim, told Eco-Business that, like OCBC, UOB now prohibits the financing of new subcritical coal-fired power plant projects, adding that the lender will only support power plants with a maximum carbon intensity 830g of carbon dioxide per kilowatt-hour.
“This is in line with what the industry considers an efficient, super-critical coal-fired facility,” he said.
We need banks to stop issuing policies on coal power that play around the margins. Coal-fired power is the biggest source of greenhouse gas emissions worldwide and every new power station is a step closer to runaway climate change.
Julien Vincent, executive director, Market Forces
Are the banks doing enough?
Julien Vincent, executive director of Market Forces, told Eco-Business that all of Singapore’s banks need to raise their sustainable finance game, and OCBC’s new coal policy might not change much.
“On the face of it, OCBC’s policy goes further than DBS’ from earlier this year, as OCBC at least describes types of technology they won’t finance in future. But there are big question marks over how much this will change OCBC’s lending going forward,” he said.
Market Forces analysed OCBC’s coal lending over the past five years and found that only 4 per cent of the bank’s energy deals financed new power plants with low-efficiency subcritical technology.
“We need banks to stop issuing policies on coal power that play around the margins. Coal-fired power is the biggest source of greenhouse gas emissions worldwide and every new power station is a step closer to runaway climate change.”
“We have clean, reliable and affordable renewable energy ready to replace coal. Policies from banks need to signal to the market that wholesale change in how we produce energy is necessary,” he said.
Still ahead in Asean
Although Singapore’s banks have not ruled out financing coal, they are doing much more in sustainable finance than banks in other Asean countries, according to report by World Wide Fund for Nature released in October last year.
Jeanne Stampe, head, Asia, sustainable finance, WWF-Singapore, told Eco-Business that banks need to set time-bound targets on the composition of their loan portfolio that are aligned with the Paris agreement, including targets on renewable energy.
They also need to demonstrate “a clear transition” away from coal and disclose risks using the Task Force on Climate-related Financial Disclosures (TCFD), a framework set up by the G20, a collective of the world’s largest economies, last year.
Stampe added that banks need to push their clients in the energy and coal mining sectors to “develop a clear transition plan towards a 1.5 degree pathway,” as well as disclosure in compliance with TCFD.
“Financial institutions can be an agent of change for positive economic, environmental and social outcomes if their portfolios and lending activities are aligned to science-based objectives,” she said.