DBS sets decarbonisation targets for 7 sectors it finances, including oil and aviation

SINGAPORE – South-east Asia’s largest lender DBS has mapped out its decarbonisation targets in some of the most carbon-intensive sectors it finances, as the bank ploughs ahead with its net-zero pledge.

Decarbonisation targets have been set for seven sectors – power, oil and gas, automotive, aviation, shipping, steel and real estate.

Data coverage targets were also set for two sectors – food and agribusiness, and chemicals.

In particular, an absolute emissions reduction target has been set for the oil and gas sector. By 2030, the bank is looking to reduce by 28 per cent the absolute emissions in this sector that are attributable to DBS. 

This is in line with the International Energy Agency’s net-zero emissions by 2050 scenario.

The bank on Tuesday said its target will cover emissions in categories known as Scope 1, 2 and 3.

Scope 1 covers direct emissions while Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by its client.

Scope 3 refers to all other indirect or downstream emissions that occur in a company’s value chain.

Real estate  is the largest business of the nine sectors that the bank finances.
Together with shipping, the target metric will be the “alignment delta” that is expressed as a percentage, which is derived based on emissions intensity.

For real estate, the bank’s 2030 target is to lower by 42 per cent from the existing alignment delta, for instance. 

Power, automotive, steel and aviation target metrics will be measured in terms of emissions intensity.

Collectively, the nine sectors represent the most carbon-intensive institutional banking segments financed by DBS.

They make up 31 per cent of the bank’s outstanding loans, but constitute the vast majority of the Institutional Banking Group’s financed emissions.

The lender said its targets will be reviewed periodically as science and client data become available. It will also update on its progress annually through its sustainability report.

Group chief executive officer Piyush Gupta said: “Our firm conviction is that our net-zero commitment, made last October, must be supported by a clear and detailed road map and plan.

“However, charting a viable course of action that is constructive and impactful is not easy, given challenges in mapping out suitable industry pathways and realistic medium-term milestones in markets with differing starting points.”

Mr Piyush noted that the bank’s decarbonisation targets will act as the “north star” for its financing activities and guide the group to reach net zero by 2050 through measurable change.

Asked at a briefing how far DBS will go down the value chain, he said it was “a question of availability and materiality”.

“So we’ve tried to be sensible about where are the big numbers, who’s got agency, who can do something about it and how do we capture it?”

In instances where the results are marginal or where it is hard to measure, Mr Piyush said his team will come back and look at it later.

He acknowledged that the bank’s targets will be a challenge for the small and medium enterprises (SMEs) but added that DBS is now coming up with simplified calculators and baseline estimates to help SMEs calculate their carbon intensity.

“It’s a little flawed because it’s an average of averages. In reality, you need to figure out the standard deviation, who’s emitting more and who’s emitting less, so an average is not the best way, but it’s a start,” the group’s chief said.

The bank’s set of targets come eleven months after it pledged in Oct 2021 to reach net zero carbon footprint by 2050.

More than 100 banks in the world that make up more than 43 per cent of the global banking assets worth about US$65 trillion, had made the promise under the Net-Zero Banking Alliance. But few have set a clear timeline on how to achieve the goal.