SINGAPORE – Singapore’s three top banks DBS, OCBC and UOB are significant funders of coal projects in the region, an analysis of their investments shows, putting them at odds with a growing number of global banks shunning financing of polluting coal-fired power stations and mines.
Coal is a major source of carbon dioxide, the main greenhouse gas blamed for heating up the planet.
All three banks have adopted sustainable financing guidelines and told The Straits Times they carefully consider each investment with regards to environmental impact versus the need to bring electricity to millions of people.
Yet Market Forces, the Australian financial green group that conducted the study, says the coal lending is at odds with the need to cut greenhouse gas emissions and the rapid growth of affordable renewable energy.
Market Forces says DBS Bank, Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB) have financed 21 coal project deals since 2012 worth US$2.29 billion (S$2.98 billion), more than half of which were for coal-fired power stations, mainly in Indonesia and Vietnam.
Market Forces analysed data from IJGlobal, a leading online energy and infrastructure finance data service, relating to the deals.
OCBC was the top lender, participating in 14 coal deals since 2012 worth US$1.14 billion. This included US$195 million for the 2,000 megawatt (MW) Tanjung Jati B coal-fired power plant in Indonesia last year.
DBS Bank was involved in 12 deals worth US$885 million, five of which also involved OCBC.
This included a US$160-million loan to a consortium to buy Australia’s Port of Newcastle, a major coal shipment hub, and a US$140-million loan to partially fund the construction of a 1,900MW power plant in Central Java.
UOB participated in five deals worth US$262 million. The bank’s largest loan totalled US$92 million for the 2014 refinancing of the Newcastle Coal export terminal expansion.
In addition, DBS has been named as part of a loan syndicate funding the construction of four 1,200 MW coal-fired power plants in Vietnam, the report says, and is a financial adviser for a number of large power plants planned for Indonesia.
Singapore has declared 2018 the year of climate action and the country was an important player in the reaching of a deal for the 2015 Paris Climate Agreement, in which nearly 200 nations agreed to limit global warming to less than 2 deg C.
To achieve this, nations need to rapidly cut greenhouse gas emissions by shifting to cleaner sources of energy for industry, power generation and transport.
Green groups, including Greenpeace, say major investment plans in South-East Asia to build dozens of coal-fired power stations could send global carbon dioxide emissions soaring, risking the Paris “below 2 deg C” goal and increasing local air pollution.
“Banks justify coal investments by rightly pointing out that communities need energy. However, with a rapidly improving economic outlook for wind and solar, including renewable energy already being cheaper than coal in many countries, investments in coal power serve little more than the companies seeking to build their old, dirty technology,” says the Market Forces report.
Other banks have cut back on coal investments. HSBC last year announced no more financing for coal mines or new coal power plants in rich nations. Deutsche Bank last year pledged no new financing for new thermal coal mines or new coal-fired power plants.
Australia’s four big banks have also sharply curbed lending to coal projects since 2015.
In response to questions from The Straits Times, a DBS spokesman said: “According to the International Energy Agency, while South-east Asia is taking steps towards adopting low-carbon energy, by 2040, coal will still account for 40 per cent of the generation mix.
“Many of our neighbouring developing countries are dependent on coal as part of their energy mix to deliver economic growth, and the financial system has a responsibility to ensure that the transition to renewables happens in a sustainable manner,” the spokesman said.
OCBC Bank chief risk officer Vincent Choo said: “The financing of energy sector projects, where environmental impact is mitigated in compliance with national and local laws and regulation, enables local communities to gain access to electricity and opens up employment opportunities.”
A UOB spokesman said the bank was committed to responsible financing to support sustainable development and to mitigate environmental, social and governance risks in its lending.
The spokesman said it was bank policy to conduct enhanced due diligence for companies in potentially high-impact industries, including the energy sector, for which the bank advocates using appropriate technologies, such as carbon capture and storage, to mitigate potential environmental impacts.
“Across our network, we also finance and support renewable energy projects, in areas such as solar power and hydropower, that comply with local environmental requirements,” the spokesman added.