Copublished with BankTrack<\/p>\n<\/div>
Financing decisions play a critical role in driving the energy transition by stimulating investments in clean energy while divesting from fossil fuels. Yet, banks\u2019 policies lag behind in addressing a pressing issue: how to invest effectively in the early retirement of coal power plants? With over 2,400 such plants still in operation, thousands will have to be retired before their designated end date to align with the IEA\u2019s net zero by 2050 roadmap (1).<\/strong><\/p>\n<\/div> When Singaporean bank DBS released its 2023 Sustainability Report on 5 March 2024, the media praised the bank for being the first in Southeast Asia to support the early retirement of coal within its updated thermal coal policy (2). However, a closer look at the updated policy shows that the bank\u2019s commitment to coal retirement is weak at best, and is lacking fundamental aspects of a strong coal policy, such as excluding financing for coal companies and ruling out finance for coal expansion.<\/p>\n<\/div> Like most international banks, DBS already had a thermal coal policy that included a deadline for zero coal exposure by 2039. DBS\u2019 updated policy includes a new commitment to \u201cleverage regional and market taxonomies to achieve meaningful decarbonisation in sectors which remain reliant on thermal coal\u201d, alongside mention of its role as the financial advisor for the first early retirement of a coal power plant, Cirebon-1, in Indonesia, and involvement in other working group discussions (3).<\/p>\n However, having a thermal coal policy that only relies on taxonomies is insufficient. Regional and national taxonomies in Southeast Asia contain inconsistent positions on coal, with the Singapore-Asia Taxonomy being the most ambitious, while others do not refer to coal\u2019s early retirement at all (4). What is worse is that some of the market taxonomies in the region, such as Indonesia\u2019s, even indirectly support coal\u2019s continued expansion through the classification of certain types of coal power development (off-grid captive coal plants powering industrial facilities) as a \u201ctransition\u201d activity (5).<\/p>\n While DBS underscores its intention to align its practices with existing taxonomies, the result is that DBS\u2019 criteria and commitment for coal retirement is unclear (6). Financiers should be guided by Reclaim Finance\u2019s ten guiding principles for coal retirement<\/a><\/span> to ensure that the early retirement of a coal asset aligns 1.5\u00b0C pathways, prioritizes renewables, avoids false carbon-based solutions and retrofitting delays, and is socially and environmentally just.<\/p>\n For example, DBS must provide greater clarity on how its role as financial advisor for the Cirebon-1 coal plant will take into account provisions for social and environmental remediation at the Cirebon site. This must include having safeguards in place for transparency and accountability of the phaseout transaction, as well as consulting with local communities who have suffered severe health and livelihood impacts from the plant\u2019s pollution (7).<\/p>\n<\/div> Despite its coal phaseout intentions, DBS remains a financier of major coal clients and developers. Reclaim Finance\u2019s Coal Policy Tracker<\/a><\/span> has detailed recommendations<\/a><\/span> for how it can close this loophole (8). For example, when deciding whether to finance clients, the bank should consider how much of their power generation, instead of revenue generation, comes from coal. This would halt finance for large, diversified companies that generate revenue from a range of sources, despite expanding coal capacity.<\/p>\n These loopholes have major, real world consequences. In the same week that DBS launched its Sustainability Report, it underwrote a bond issuance by Adani Green Energy, a subsidiary of the world\u2019s largest private coal developer, the Adani Group (9). Adani Green is accused of being the Adani Group\u2019s greenwashing vehicle, used to attract finance for other parts of its business, including coal expansion projects (10). DBS cannot credibly claim to be a regional leader on coal phaseouts while lacking a policy to stop corporate financing of coal companies \u2013 let alone the world\u2019s largest private coal developer that is dogged by allegations of corruption (11).<\/p>\n If DBS wants to position itself as a leader in the region for coal phaseouts, then it must make explicit commitments to only finance phaseouts that are 1.5\u00b0C-aligned and to repair harms caused by existing coal plants. At the same time, the bank must strengthen its thermal coal policy to stop financing of coal developers at the corporate level immediately. Paying lip service to early retirements through the vague commitment to non-interoperable market taxonomies should not be considered a phaseout criteria or policy. <\/b><\/p>\n<\/div><\/div><\/div>No clear commitment to coal phaseout<\/h2><\/span>
Real coal phaseout means no more lending to coal expansion companies<\/h2><\/span>