Oversea-Chinese Banking Corporation’s (OCBC) sustainable finance portfolio hit $52 billion at the end of September, surpassing the bank’s $50 billion target more than two years ahead of schedule.
The latest figure, revealed by group chief executive officer Helen Wong on Dec 3, is up some $8 billion year to date. Southeast Asia’s second-largest financial services group by assets reported that its sustainable finance portfolio amounted to $44 billion at the end of 2022, which was up 29.4% y-o-y from $34 billion reported at end-2021.
OCBC set the $50 billion target in 2021 after surpassing its original targets of $10 billion by 2022 and $25 billion by 2025 ahead of time.
Speaking on a panel at the COP28 Singapore Pavilion in Dubai, Wong cites “natural demand” for sustainable loans owing to government policies. “One good example in Singapore is that government entities can only hold events, and also rent real estate, only if they have a green mark certification. So that helps; that means there is natural demand. With natural demand, over the last few years, we actually see that our sustainable finance portfolio is growing at a much faster pace.”
Wong also names “four big challenges” in getting the bank’s clients to transition towards net zero. “The first one is whether we have availability of good ESG data, and the second has to be the market conditions affecting some of the actions. The third is [whether] we have good enough development in technology and the last one, I think, is consistency of government policies.”
See also: From one war to two: OCBC expects slower loan growth, sustained NIMs after 3QFY2023
Inconsistent ESG data is a big issue, says Wong, particularly in the real estate sector. “Real estate [companies] may not necessarily be providing consistent and standardised data across countries. For example, we want whole-building emission data, but some clients say ‘I minus the tenants’ emissions’, and so, that is not consistent. For hotels, some give carbon dioxide emissions per room, some give carbon dioxide emissions per square metre. So, these are the inconsistencies of data.”
Cost is another concern for OCBC’s clients when embarking on green projects. “[Let’s] say we want to build a building with green steel; green steel costs about 40% above what we are having to [pay] now. So, how does that eventually sum up to be something that customers would [want] to do?”
OCBC’s net-zero plans
See also: OCBC unveils net-zero targets across six sectors, covering two-thirds of wholesale loan portfolio
Wong is unlikely to raise OCBC’s sustainable finance target again. In May, Wong said it is “not crucial” for the bank to keep increasing this target. “This will become very business-as-usual to us; we will continue to grow our sustainable financing. If we continue to grow double-digits every year, whatever target you set becomes just a number to be beaten.”
In October 2022, OCBC became a signatory to the Net-Zero Banking Alliance (NZBA), a United Nations-convened, industry-led initiative that supports the implementation of decarbonisation strategies. The bank then unveiled in May its decarbonisation targets for six sectors, along with its plan to achieve net-zero financed emissions by 2050.
The six chosen sectors are: 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.
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.
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.
Follow The Edge Singapore’s coverage of COP28 here.
Photo: COP28 Singapore Pavilion
