OCBC unveils net-zero targets across six sectors, covering two-thirds of wholesale loan portfolio
With OCBC's announcement, all three local banks have now unveiled their sectoral decarbonisation plans. How do they compare?
Oversea-Chinese Banking Corporation (OCBC)
O39 has unveiled 2030 and 2050 targets to reduce financed emissions in six sectors: power, oil and gas, real estate, steel, aviation and shipping.
Notably, OCBC aims to reach net-zero financed emissions in the power and aviation sectors of its loan portfolio by 2040 and 2050 respectively.
Together, the targets cover 42% of OCBC’s corporate and commercial banking loan portfolio, specifically the parts of the value chain responsible for the majority of emissions. By sector, however, the targets cover two-thirds of OCBC’s wholesale loan portfolio, says the bank on May 16.
In addition, OCBC will no longer extend project financing to upstream oil and gas projects that obtained approval for development after 2021. This is on top of the bank’s sector target to cut oil and gas emissions by 35% by 2030 and 95% by 2050, compared to a 2021 baseline.
In response to media queries, OCBC’s head of global wholesale banking Tan Teck Long says the bank’s current exposure to upstream oil and gas projects is “very little”, as OCBC had started work on decarbonising its portfolio before the target was announced. “It has been reduced to an immaterial amount.”
OCBC has set interim targets for 2030 as a checkpoint to ensure the bank is on track towards its 2050 goal. According to OCBC, the targets will be reviewed at least once every five years.
The sectoral targets differ in metrics. Oil and gas, for example, bears an absolute emissions reduction target.
For the other five sectors, OCBC says its goal is to reduce emissions intensity — or emissions per unit of output — to reduce emissions at a scale consistent with ensuring continued economic growth.
For real estate and shipping, OCBC’s targets are to bring alignment delta to equal or below 0% by 2030. Alignment delta is derived based on emissions intensity, which is expressed as a percentage to measure how far current figures differ from the reference pathway.
OCBC says the alignment delta method is relevant for sectors made up of varying asset types and activities, compared to a range of diverse underlying reference pathways.
During OCBC’s 2021 base year, the real estate sector of its portfolio performed 8% better than the reference scenario from the Carbon Risk Real Estate Monitor (CRREM), while the shipping sector of its portfolio was 4.5% worse than the reference scenario from the International Maritime Organization’s Poseidon Principles.
Helen Wong, OCBC Bank group CEO, says: “Our sectoral net-zero targets are ambitious, quantitative and grounded in science. We will partner our corporate clients to meaningfully contribute to a net-zero Asean and Greater China by 2050 in an orderly and just transition. These targets are a culmination of months of hard work by many colleagues bank-wide and in our core markets of Asean and Greater China.”
The interim and mid-century targets are in line with the requirements set by the Net-Zero Banking Alliance (NZBA), a United Nations-convened, industry-led initiative that supports the implementation of decarbonisation strategies. In October 2022, OCBC became a signatory to the NZBA.
Signatories commit to transitioning the operational and attributable greenhouse gas emissions from their lending and investment portfolios to align with net-zero pathways by 2050 or sooner. Within 18 months of joining, signatories also commit to set 2030 targets, or sooner, along with a 2050 target, as well as intermediary targets every five years from 2030.
Signatories must also publish annual reports detailing absolute emissions and emissions intensity. Within a year of setting targets, signatories must also disclose their progress in establishing a board-level transition strategy by sector.
All three local banks’ plans, compared
OCBC is the last of the three local banks to announce their sectoral plans; fellow signatories DBS
D05 and UOB
U11 released their sector-specific transition strategies last year.
UOB’s plan, announced on Oct 31, 2022, covers the power, automotive, oil and gas, real estate, construction and steel sectors. UOB also committed to exit financing for the thermal coal sector by 2039.
DBS, meanwhile, announced its plans on Sept 13, 2022, covering the power, automotive, oil and gas, real estate, shipping, steel and aviation sectors. DBS also put the chemicals and food and agribusiness sectors on a watchlist, choosing to gather data on these two areas as “there is still limited industry consensus” on their pathways to net zero.
OCBC’s Tan says the bank had considered targets for agriculture, but faced difficulty in gathering data. “That’s what we’re working on.”
Across all three banks, the common sectors identified are power, oil and gas, real estate and steel.
On power, UOB plans to reduce emissions intensity by 61% by 2030 and 98% by 2050 against a 2021 baseline, while DBS aims to reduce emissions intensity by 47% by 2030 and 100% by 2050 against a 2020 baseline.
On oil and gas, UOB said no new project financing for upstream oil and gas projects will be approved for development after 2022. DBS, meanwhile, will cut its oil and gas financed emissions by 27.7% by 2030 and 92% by 2050.
On real estate, UOB plans to reduce emissions intensity by 36% by 2030 and 97% by 2050, while DBS aims to bring alignment delta to equal or less than 0% by 2030.
On steel, UOB plans to reduce emissions intensity by 20% by 2030 and by 92% by 2050, while DBS aims to reduce emissions intensity by 27% by 2030 and by 93% by 2050.
OCBC has committed $47 billion towards its sustainable finance portfolio, just shy of the bank’s target to grow this to $50 billion by 2025. Despite this, Wong revealed at the bank’s 1QFY2023 results on May 10 that OCBC will not be increasing this target soon. “I’m not adjusting this, because it is still another two-plus years to 2025. But again, that doesn’t stop our focus on helping our customers to transition to net zero.”
As at 11.31am, shares in OCBC are trading 4 cents higher, or 0.33% up, at $12.30.
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