Our Approach to Phase Out Thermal Coal Financing
DBS commits to energy transition in Asia. Customers urged to diversify with ambition. Complete phase-out with zero exposure by 2039.
Since 2018, DBS has progressively refined our commitment to tackle climate change. In February that year, we issued a statement to restrict financing to coal-fired power projects utilising more advanced technologies and to stop financing new thermal coal mining projects. This was followed by a blanket cease in financing any new coal power assets in April 2019.
We have been monitoring the net-zero, or Paris Agreement-aligned, commitments made by our peers and customers. One principal stakeholder concern is related to the dearth of time-bound actions to define that ambition. To that end, we have studied the mechanics of different climate alignment methodologies, such as 2° Investing Initiative’s Paris Agreement Capital Transition Assessment methodology1 and the Platform for Carbon Accounting Financials2 method. These methodologies receive further support with the launch of the Science Based Targets initiative for Financial Institutions3.
The alignment to below 2°C pathway can be interpreted in a myriad of ways. The Intergovernmental Panel on Climate Change’s (IPCC) Special report: Global warming of 1.5°C profiled no fewer than ninety 1.5°C pathways4 . The multiple pathways underline varying degrees of optimism for large-scale deployment of carbon dioxide removal measures, such as adoption of carbon capture and storage technology or afforestation efforts.
Nevertheless, neither the lack of standard alignment pathway nor the imprecision of climate data is a justifiable reason for inaction. To signify our ambition, which will set us on a path for future consideration of steeper reduction in our exposure to carbon intensive industries, we are committed to zero thermal coal exposure (encompassing loans to mining and power generation) latest by 2039. This timeline has been determined considering our existing long-tenor exposure will run off by then.
We intend to reach this goal in the following ways:
1) Effective immediately, we will cease onboarding new customers who derive more than 25% of their revenue from thermal coal. The threshold will be lowered as time progresses;
2) From January 2026, we will stop financing customers who derive more than 50% of revenue from thermal coal, except for their non-thermal coal or renewable energy activities. These will be reflected in legally binding documentation. We will stop general purpose financing which can be fungible. The threshold will be lowered as time progresses;
3) We will leverage our Sustainable and Transition Finance Framework to achieve meaningful decarbonization in sectors which remain reliant on thermal coal. This will be conducted through engagements with customers to establish their transition strategies, and the incorporation of greenhouse gas reduction target in all applicable sustainability linked loan structures; and
4) We will disclose our thermal coal exposure annually in our Sustainability Report.
4 Rocky Mountain Institute, Charting the Course to Climate-Aligned Finance: Five Barriers to Alignment and How a Sectoral Approach can Help, March 2020.