DBS will phase out thermal coal exposure by 2039, making it the first Singapore bank to cease financing the sector.
It said yesterday that it will stop taking on new customers who derive more than a quarter of their revenue from thermal coal with immediate effect.
The bank will also stop financing customers who derive more than half of their revenue from thermal coal from January 2026, except for their non-thermal coal or renewable energy activities.
Both thresholds will be lowered with time, DBS noted, adding that it will disclose its thermal coal exposure in its annual sustainability report to provide transparency on progress made.
Its pledge comes as financial institutions across the globe face growing pressure from shareholders and lobby groups to avoid investments in the fuel.
DBS' 2020 Sustainability Report noted that exposure to thermal coal mining at the end of 2019 was $1.17 billion while $1.63 billion was exposed to coal-fired power plants. This represented about 0.3 per cent of total exposure for its institutional banking group.
At the same time, its exposure to renewable energy projects has increased to $4.2 billion last year, from $2.85 billion in 2019.
DBS' group head of institutional banking Tan Su Shan 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."
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, it announced that it will restrict financing to only coal-fired power projects that adopt technologies that emit lower carbon emissions, as well as stop financing new thermal coal mining projects. In April 2019, it announced a blanket ban on 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 to 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.
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