Bank net-zero plans are climate positive

When it comes to driving corporate action on climate change, few tools are more effective than the influence of bank finance. Money talks and banks can encourage their clients to become greener by setting increasingly tougher emission reduction targets. In the past, banks, through their lending and investments, have been major backers of polluting industries. But times are changing. Financial institutions are increasingly taking responsibility for the emissions directly linked to their lending. This is driving greener investments to halt and reverse the impacts of climate change and damage to nature. Regulators, investors and customers – and the march of climate change – are the forces behind this.

This week, Singapore’s OCBC Bank stepped up its climate action plan a notch. It released a road map that it says will help it achieve net-zero financed emissions by 2050. The plan covers the six most polluting sectors financed by the bank and sets 2030 and 2050 emissions reduction targets for each sector. These are oil and gas, power, real estate, steel, aviation and shipping. How does this work? The bank is effectively decarbonising its loan portfolio, and success will depend on the actions of its thousands of clients. The sectors make up 67 per cent of OCBC’s corporate and commercial banking loan portfolio, while 42 per cent of the portfolio falls within the scope of targets. For oil and gas, the bank has set absolute emissions reduction targets – a reflection, the bank says, of the fact that emissions and consumption of oil and gas have to decline. That means lending to the oil and gas industry also needs to fall.