DBS, Southeast Asia’s largest bank, has announced interim targets it aims to achieve to reach net-zero emissions by 2050.
The Singapore-based company pledged to decarbonize its loan portfolio to net zero by 2050 last October and the new targets, unveiled on Tuesday, detail a carbon reduction schedule for high-emitting sectors by 2030 and 2040.
The new targets emerge the week after Singapore announced a revised net zero national target for 2050.
The sectors DBS has focused on – energy, oil and gas, automotive, aviation, shipping, steel and real estate – account for the “vast majority” of the group’s funded issues, the bank said, without breaking them down by sector.
While more than 100 banks have pledged to reduce their carbon exposure to net zero by 2050, mid-century is increasingly seen as too far away to constitute meaningful climate action.
DBS chief executive Piyush Gupta said committing to net zero by 2050 “when three successors after me would have to struggle with this problem” was not ideal, so shorter-term goals were needed .
DBS said it was one of the first banks in the world to set interim targets, and its commitments are ambitious as the bank operates in emerging markets where the energy transition has been relatively slow.
There is a lot of skepticism as to why banks are doing this [set net-zero targets] – do we greenwash? You have to believe we tried to do it because we think it’s the right thing to do.
Piyush Gupta, CEO, DBS Bank
“What we are committing to is not a dream,” Gupta said, acknowledging that persuading customers to decarbonize was not easy in emerging Asia. “Sometimes customers have energy security issues, it [decarbonisation] goes on the back burner,” he said.
The most notable focus of DBS is the oil and gas sector.
The bank aims to reduce scope 1, 2 and 3 emissions – that is, emissions from its direct operations to those in the value chain – of its oil and gas portfolio to net zero by here 2050.
Bruce Robertson, an energy finance analyst for the Institute for Energy Economics and Financial Analysis (IEEFA) think tank, said DBS’s goal of reducing absolute emissions from oil and gas was “impressive” because it this is the most difficult area to reduce.
He said the interim targets showed DBS “takes decarbonization seriously” and that the bank was among the frontrunners in the region to clean up its loan portfolio.
DBS has not set targets for agriculture and chemicals because those sectors are currently too complex to measure and track, the company said in a summary of its net zero plan. It plans to collect more data from these sectors before setting an emissions reduction target.
The bank’s 2050 net zero goal is aligned with the International Energy Agency’s (IEA) Net Zero Emissions Scenario by 2050. It has not been verified by the Science Based Targets Initiative (SBTi), which aligns decarbonization targets with the Paris climate agreement.
Yolanda Chung, DBS’s sustainability manager for institutional banks, said compliance with SBTi was problematic because the standards require a “very rapid phase-out of fossil fuels”.
“It remains credible to say that [DBS’s net-zero target] is science-based, because we’ve gone with the IEA’s benchmark pathways – which are one of the strictest pathways you’ll find,” she said.
The enigma of coal
DBS has become the second bank in Southeast Asia to abandon new coal-fired power projects, making the announcement days after rival OCBC abandoned coal in April 2019. DBS continues to fund coal projects existing ones and plans to completely withdraw from coal financing by 2039.
Gupta said the bank was willing to sell its coal portfolio to shut down the projects – the Asian Development Bank drew up a plan to fund coal plant shutdowns during the COP26 climate talks – but said no. added that selling coal projects to other lenders “wouldn’t make a difference to planet Earth.”
Gupta said DBS’s renewable energy portfolio is worth about $10 billion, while the bank’s coal portfolio is worth $1.5 billion, or about 0.3% of its loan portfolio. .
The energy transition has presented banks with a trillion-dollar investment opportunity, Gupta said.
DBS’s announcement comes a month after the bank was accused of laundering its pledge to stop financing coal after it promoted its pledge on LinkedIn with the marketing slogan “More like an eco-warrior, less like a bank.”
Critics said the postponement of coal divestment until 2039 was indicative of how some financial groups have delayed climate action.
Gupta told reporters today: ‘There is a lot of skepticism as to why banks are doing this [set net-zero targets] – do we greenwash? You have to believe we’re doing this because we think it’s the right thing to do.
This week, the bank announced that it was the first Asian bank to enter a virtual world known as the Metaverse to promote its sustainability efforts.