A few weeks after the Singapore government launched an initaitive declaring 2018 the Year of Climate Action, a coalition of international green groups has issued an open letter calling on the country’s powerful banks to stop financing coal power in Asia.
In a letter published on Wednesday, NGOs including Australia’s Market Forces, Friends of the Earth US and Japan, and Indonesian group Wahli said that if global warming is to be capped below 2˚C below pre-industrial levels to avoid the worst consequences of climate change, Singapore’s banks must follow the lead taken by their European and North American counterparts and stop funding new coal power plants.
The coalition includes advocacy groups from Vietnam and Indonesia, where most of the world’s largest coal-fired power stations are in the works. Funders for coal projects in these fast-growing economies include Singapore’s DBS bank, OCBC and UOB, the letter points out.
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“Not only [are Singapore’s banks] failing to deliver policy and practical responses to climate change, but instead [they are] becoming an increasing part of the problem through the continued multi-billion dollar financing of coal-fired power stations and related infrastructure,” the letter reads.
The Singaporean government has declared 2018 to be the Year of Climate Action. We are calling on Singapore’s banks to help make this a reality.
NGO coalition including Greenpeace, Friends of the Earth and Market Forces
The statement points to the coal projects that Singapore’s banks are currently financing in Asia, revealed in a report by Market Forces in January. They include the 1,200 megawatt Nghi Son 2 coal plant in Vietnam, which is being co-funded by OCBC and DBS.
The letter highlights that 14 global banks including BNP Paribas, ABN AMRO and Deutsche Bank have stopped directly financing new coal plants, but banks in Singapore—the world’s fourth largest finance hub—continue to back new coal power plants in Asia.
“New coal-fired power stations are particularly unacceptable given the potential for clean renewable energy to meet projected energy demands,” the letter reads.
It also pointed out that unlike 92 of their global peers from 37 countries, no Singaporean bank has adopted the Equator Principles, which provide a minimum standard for due diligence in financing fossil fuel projects.
DBS became the first Asian bank to unveil a climate policy about a fortnight ago. The policy did not rule out financing new coal-fired power projects in developing countries such as Vietnam and Indonesia. It will only stop funding coal project in developed countries, where the bank has a small presence.
Seven proposed coal plants that DBS is financing in Indonesia and Vietnam will generate 1.5 billion tonnes of carbon dioxide emissions over their lifetime, equivalent to 30 years of Singapore’s annual emissions, the NGOs pointed out.
Burning coal for energy is the single biggest global contributor to greenhouse gas emissions. Though renewable energy in Southeast Asia is predicted to quadruple by 2040, by then coal will still provide 40 per cent of the region’s soaring energy demands, according to recent projections by the International Energy Agency.
In response to the letter, DBS said that Singapore’s developing neighbours are dependent on coal as part of their energy mix to deliver economic growth.
“We believe that the financial system has a responsibility to ensure that the transition to renewables happens in a sustainable manner,” the bank’s head of sustainability Mikkel Larsen told Eco-Business.
OCBC referred Eco-Business to its pledge in support of Singapore’s Year of Climate Action. In a section on responsible financing, the company said it recognises “the relevance of the Equator Principles” and reviews Environmental Impact Assessment (EIA) reports before awarding loans for energy projects.
The bank said it has a Responsible Financing Framework with policies on environment, social and governance (ESG) risk, and that for energy projects, particularly fossil fuel projects, “enhanced due diligence is performed on the operational aspects of the customers’ business activities.”
Eco-Business has also reached out to UOB for comment, but the bank had not responded at press time.
The letter pointed to comments from World Bank president Jim Yong Kim, who has warned that plans to build more coal-fired power plants in Asia would be a “disaster for the planet” and undo commitments made to the Paris Agreement on climate change.
“The Singaporean government has declared 2018 to be the Year of Climate Action. We are calling on Singapore’s banks to help make this a reality,” the letter reads.
The argument that banks are performing a social function by improving energy access through their financing of coal development is weak at best.
Jessica Robinson, founder, Moxie Future
Can banks justify financing coal in developing countries?
Jessica Robinson, former Asia head of the United Nations Principles for Responsible Investment, and founder of Moxie Future, told Eco-Business that the argument that banks are performing a social function by providing developing countries with much-needed energy from coal is “weak at best.”
“The banks are simply making deals where they can. Stronger government policies for developing clean energy markets are needed,” she said. “But we also urgently need the banks themselves to be more honest, transparent and accountable.”
Dr Sanjay Kuttan, council member of the Sustainable Energy Association of Singapore, and programme director, Energy Research Institute at Nanyang Technological University, said that Singapore’s banks find it hard to turn coal projects down from a business perspective.
“The key question is, why aren’t there more large, capital intensive renewable projects that could distract the banks from coal and redeploy funding towards renewables,” he commented.
While private equity is pouring into funding renewables, there are not enough “good projects” to fund, he noted, adding that while there is a lot of rhetoric from governments about going green, there are few large-scale renewable projects to invest in.
He added that unless electricity prices reflect the true cost of energy, governments stop subsidising fossil fuels and national energy providers rethink their role in changing the energy mix, “banks will be forced to do what is necessary to survive.”
“Unfortunately everyone has to come to the table and play the green game together,” he said.