United Overseas Bank (UOB) has announced sectoral plans to reach net-zero by 2050.
UOB’s commitments cover six sectors, which make up about 60% of its corporate lending portfolio, announced the bank on Oct 31.
These six sectors are power, automotive, oil and gas, real estate, construction and steel.
UOB commits to no new project financing for upstream oil and gas projects approved for development after 2022.
By 2050, UOB will reduce emissions intensity for the remaining five sectors by between 85% and 100%, against a 2021 baseline.
UOB’s commitments include interim 2030 targets. By the end of this decade, UOB says it will reduce emissions intensity by between 20% and 61% for the five sectors.
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As of Sept 30, outstanding loans to the oil and gas industries make up 4% of UOB’s total loans. Of this figure, some $2.4 billion in outstanding loans are to upstream industries, while $9.3 billion in outstanding loans are to traders or downstream industries.
“Outstanding exposure is to downstream players and traders which are mainly national oil companies (NOCs) and global firms, while short-term structured loans account for a significant share of the remainder. A considerable portion of upstream exposure is to NOCs and international oil companies, while vulnerable accounts were already classified and their collateral value marked down (by as much as 90%) by end-2017,” reads UOB’s 3QFY2022 presentation slides from Oct 28.
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In addition, UOB has committed to stop financing the thermal coal sector by 2039. This is on top of its existing prohibitions on new project financing of greenfield or expansion of coal-fired power plants and thermal coal mines.
UOB says it will conduct annual reporting to track progress against its net-zero commitments.
Over time, the bank will expand the scope of its targets to include additional sectors “as data and climate scenarios become available”.
UOB also announced that it will join the Net-Zero Banking Alliance (NZBA), a United Nations-supported private sector collaboration comprising 121 banks from 41 countries with US$70 trillion in global banking assets.
UOB’s chief sustainability officer Eric Lim expects UOB to complete its entry into the Alliance before the start of the 2022 United Nations Climate Change Conference (COP27) on Nov 6.
Oversea-Chinese Banking Corporation (OCBC) announced on Oct 25 that it had joined the Alliance, while fellow local bank DBS joined the Alliance in October 2021.
Wee Ee Cheong, deputy chairman and chief executive officer at UOB, says: “In Southeast Asia, our net-zero ambitions must go hand in hand with an orderly and just transition to take into account socioeconomic challenges. Even as we cut our carbon footprint, we must ensure that people’s lives and livelihoods can continue to improve.”
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Wee adds: “It is important to balance growth with responsibility on our net zero journey. Our targets are ambitious, yet realistic, and they also meet the global goals of net zero for Asean.”
As at 10.57am, shares in UOB are trading $1.09 higher, or 4.03% up, at $28.15.
Infographic: UOB
