SINGAPORE (THE BUSINESS TIMES) - DBS Bank will phase out thermal coal exposure by 2039, making it the first Singapore bank to cease financing in this area.
Singapore's largest bank announced on Friday (April 16) that it will stop taking on new customers who derive more than a quarter of their revenue from thermal coal with immediate effect.
From January 2026, DBS will also stop financing customers who derive more than half of their revenue from thermal coal, except for their non-thermal coal or renewable energy activities.
Both thresholds will be lowered with time, the bank said. It will also disclose its thermal coal exposure in its annual sustainability report to provide transparency on progress made.
DBS' pledge comes as financial institutions across the globe face growing pressure from shareholders and lobby groups to avoid investments in the fuel.
According to DBS' sustainability report in 2020, exposure to thermal coal mining and coal-fired power plants at the end of 2019 were $1.17 billion and $1.63 billion respectively, representing 0.24 per cent and 0.33 per cent of total exposure for its institutional banking group.
At the same time, its exposure to renewable energy projects increased to $4.2 billion last year, from $2.85 billion in 2019, the bank said on Friday.
Ms Tan Su Shan, DBS' group head of institutional banking, said: "Every year counts in the journey towards a low-carbon future and we recognise the increasing need for transition financing to help industries gradually navigate away from brown to green."
To scale the reach and supply of renewable energy, the bank will increasingly finance projects by leading energy players in the region, she added.
DBS has made several changes to its coal commitments over the last few years. In February 2018, the bank announced that it will restrict financing to only coal-fired power projects which adopt more advanced technologies that emit lower carbon emissions, as well as stop financing new thermal coal mining projects. In April 2019, it announced a blanket cease in financing new coal power assets.
Banks worldwide have made similar pledges to cut thermal coal financing in recent months.
Last year, Australia's big four banks set various targets to exit direct thermal coal investments across the 2030 to 2035 time horizon.
Spanish bank Santander announced in February that it will cut all exposure to thermal coal mining and stop providing services for power generation clients that earn more than 10 per cent of their revenue from thermal coal by 2030.
Japanese banks, which are among the world's biggest lenders to coal power developers, are also paring back exposure.