DBS is first Asian bank to launch climate policy—but it’s still funding coal

Southeast Asia’s largest bank DBS last week launched a climate policy — the first bank in the region to do so.

Its new policy, published on the same day that Singapore declared 2018 to be the Year of Climate Action, consists of four pledges to tackle climate change, Eco-Business can reveal.

They include a commitment to reduce the bank’s own environmental footprint, promote sustainable finance, lend responsibly, and make climate-related financial disclosures.

In its responsible lending pledge, the Singapore-based bank says it will to stop financing new coal-fired power stations in countries belonging to the Organisation for Economic Co-operation and Development (OECD), a club of developed countries that includes the United States, United Kingdom, Japan, South Korea and Australia.

But this means that DBS, which uses the advertising slogan “Living, breathing Asia,” will continue to finance coal power in developing countries such as Vietnam and Indonesia. 

Burning coal is the biggest contributor to greenhouse gas emissions, and the most powerful force driving climate change—which is predicted to hurt Southeast Asia more than anywhere.

But coal is still the dominant source of power to fuel the region’s fast-growing economies, even though renewable energy has been cited as a viable alternative.

The bank stated that it will “change its focus to more efficient technologies” for coal projects in developing countries, and will stop financing new coal mines.

DBS’s pledge does not affect any of the coal projects that it is currently financing.

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DBS thinks it’s okay for wealthy countries to enjoy the economic and environmental benefits of renewable energy while poor countries can keep having their air polluted.

Julien Vincent, executive director, Market Forces

DBS, which was the first Asian bank to commit to sourcing all of its energy from renewable sources in September last year, is the first financial institution in the region to unveil a climate policy. 

It does so three weeks after a report from green group Market Forces pointed out that the bank is continuing to fund coal projects across the region in a year that the Singapore government—which founded DBS Bank 50 years ago—has declared the Year of Climate Action.

Market Forces’ report showed that DBS has been involved in 12 coal deals worth a total of $885 million since 2012, and is currently co-financing four 1200 MW coal-fired power plants in Vietnam. It is also a financial adviser for three planned coal-fired projects in Indonesia.

DBS’s policy is similar to the one introduced by London-headquartered HSBC three months ago. The international banking giant rolled out a US$100 million sustainable finance programme that included four pledges to tackle climate change, including a commitment to stop financing coal in developed countries.

Like HSBC, DBS in its policy promises to introduce environmental, social and governance (ESG) funds, and encourage “green consumer behaviour” through the products it markets to its customers.

Accompanying DBS’s policy is a statement from company chief executive Piyush Gupta, who said that the bank recognises its role in promoting sustainable development, including the transition to a low-carbon economy.

“Climate change affects us all and we seek to do our part to ensure a clean energy future. It is with this in mind that we have pledged to support Singapore’s ‘Year of Climate Action’. I believe that our commitments will result in substantial impact in the years to come,” he said.

But Julien Vincent, executive director, Market Forces, said that the bank’s policy “changes nothing” about its involvement with the coal industry.

“Currently, DBS is involved in banking syndicates for new polluting coal power stations, and their policy would not take the bank out of a single one,” he told Eco-Business.  “Of course it’s important that banks start talking more about the environmental, social and financial risks attached to coal and DBS is the first to move in that regard,” he acknowledged.

“But there is a deep cynicism in coming out with language that might look like DBS is acting, but the practical application is that nothing has to change,” Vincent said. 

He pointed out that DBS’s policy excludes coal power plants in OECD countries, where DBS is not involved in the sector, yet keeps the door open for polluting coal in developing countries. “This suggests that DBS thinks it’s okay for wealthy countries to enjoy the economic and environmental benefits of renewable energy while poor countries can keep having their air polluted,” he said.

Vincent said it was “unacceptable” for DBS to be funding an industry that is responsible for claiming thousands of lives every year in Southeast Asia due to air pollution, while renewable energy “offers a cost effective, clean development alternative to coal.”

He added that DBS’ policy will be put to the test in the coming two months, as the Nghi Son 2 coal power plant in Vietnam attempts to reach financial close. If DBS finances the 1,200 megawatt plant, it will show that its climate policy means “business as usual” for a bank that has long funded fossil fuel power projects, Vincent said. 

DBS had not responded to Eco-Business’s questions at press time.

HSBC, meanwhile, in response to questions from Eco-Business about why it was co-financing a coal power plant in Vietnam last November, said: “For now, coal is such a fundamental part of power generation in many developing countries where we operate that we do not think it is the right thing, from a social or economic perspective, to withdraw.”