Malaysian bank CIMB has unveiled a comprehensive climate policy that rules out any exposure to coal power by 2040, aligning Southeast Asia’s fifth-largest bank with the Paris Agreement on climate change.
The Kuala Lumpur-headquartered financial services group announced on Tuesday (8 December) that it will prohibit asset-level or general corporate financing for new thermal coal mines, new coal-fired power plants and expansions, except where there are existing commitments in place.
CIMB also said that it expects power generation companies such as national electricity utilities to provide a diversification strategy to reduce the share of coal in their power generation mix.
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The new coal policy makes CIMB the first bank in Malaysia and Southeast Asia to commit to phasing out coal from its portfolio by 2040, surpassing the pledges made by Singapore’s big three finance groups in 2019; the commitments made by Singapore’s banks do not include a portfolio phase-out date, only an end to new project-level finance.
Coal needs to be phased out globally by 2040 if commitments to the Paris Agreement are to be met.
In a statement, CIMB chairman Datuk Mohd Nasir Ahmad, said the bank’s coal sector guide was the latest sustainability milestone, and “part of our commitment to intensify our efforts on two fronts: grow our positive impact finance and enable a just transition to a climate-compatible future”.
Adrian Fenton, vice president, Asia sustainable finance, World Wide Fund for Nature (WWF), a conservation group that worked with CIMB on the policy, commented that coal is “increasingly unviable” from an environmental, social, and economic perspective.
“Rapidly phasing-out coal is vital for safeguarding the future prosperity and sustainability of the Asean [Association of Southeast Asian Nations] region, which is projected to be seriously affected by the physical impacts of climate change,” he said.
Fenton noted that CIMB’s coal policy “represents significant progress and exceeds existing policies of other banks in multiple ways.”
He said the onus is now on other banks, investors, and governments to halt investment and financing of new coal-fired power plants and mines, and target to exit coal by 2040.
The policy will come into effect in 2021, and applies across all of the company’s operating markets, which include China, United States, United Kingdom, India and Sri Lanka as well as key Southeast Asian markets Singapore, Thailand, Indonesia and Cambodia.
This move is in support of the Malaysia central bank’s agenda to build climate resilience in the country’s financial sector. In a speech in October, Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus outlined a number of ways Malaysia’s finance sector needed to respond to the climate crisis, including the introduction of a Climate Change and Principles-based Taxonomy.
The announcement comes a few months after CIMB was targeted by green groups for coal financing. CIMB’s Cooler Earth Summit conference was dubbed ‘Hotter Earth’ by NGOs, who highlighted the irony of CIMB staging a sustainability event while it funding coal projects.