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Green Finance / Treasury & Capital Markets
Singapore banks beef up green credentials
Homegrown lenders report robust earnings, sustainability initiatives
Tom King 8 Aug 2022

Singapore’s three homegrown banks reported resilient earnings over recent weeks, buoyed in part by rising interest rates. 

DBS, Singapore's largest lender, reported a 7% year-on-year increase in second-quarter net profit to S$1.82 billion (US$1.31 billion), its second highest on record and above forecasts.

OCBC said net earnings grew 28% to S$1.48 billion during the period, while UOB registered an 11% increase to S$1.11 billion.

A common thread which passed without much fanfare in all their reports is the growing capital committed to environmental, social and governance (ESG) and sustainable financing, and their efforts towards achieving net zero.

While the reporting of this aspect is still in its early stages, it is expected that ESG/sustainability specifics will gain more prominence in the banks’ results presentations in the future.

UOB dedicated a portion of its presentation to its ESG and sustainability efforts, and local peers are likely to replicate this focus in their future results.

For the record, DBS continues to build its sustainable financing business, and has grown its sustainable finance portfolio to S$52.7 billion as of June 30 2022, exceeding its own target of S$50 billion for 2024.

OCBC said in its second-quarter report it had committed S$36.9 billion in sustainable financing to customers as of June 30 2022, up 41% from a year ago and 5% from the previous quarter.

Clients’ ESG demand

It is widely recognized that climate change could be a significant threat to businesses and populations in Southeast Asia, but that same risk opens a gateway for green financing initiatives to prosper.

Speaking at the launch of a DBS net-zero facility in Singapore last month, chief executive officer Piyush Gupta said: “We have been empowering our clients to reduce their carbon footprint, to the tune of S$39.4 billion in sustainable financing transactions committed cumulatively, but it is equally important to lead by example and embed sustainability into our business practices and operations.”

For businesses that need to revamp their operations to meet their ESG parameters or for those keen to tap into opportunities in the green economy, banks are one of the few conduits to help them on their journey through green loans and other ESG-compliant offerings.

The three banks say they are well-placed to meet clients’ ESG demand and have been actively stepping up their respective green and sustainability offerings to customers while managing the environmental impacts of their own operations.

Last month UOB announced a green and sustainable deposits facility for its corporate and institutional clients, the first such product in Singapore offered by a local bank.

Under this solution, which was piloted with sovereign wealth fund GIC, the deposits are deployed to green loans under UOB’s sustainable finance frameworks. The frameworks cover financing solutions for eligible assets and activities that meet specific ESG criteria within green real estate, renewable energy, energy efficiency, smart city infrastructure and the circular economy.

All projects financed under the bank’s sustainable finance frameworks are aligned with the United Nations’ Sustainable Development Goals. The minimum deposit size for the solution is S$10 million and it is open to companies globally.

Net-zero initiatives

OCBC has committed to achieving carbon neutrality in operational emissions from 2022. In May this year the bank said it will invest more than S$25 million in decarbonization efforts in Singapore, Malaysia and Greater China.

The outlay will be used to install energy-efficient technology to reduce its carbon emissions, and solar energy systems that will increase renewables in its energy mix for powering operations to reduce approximately 10,000 tonnes of carbon emissions within the next four years.

DBS in July opened Singapore’s first net-zero building by a bank, the DBS Newton Green, investing over S$5 million in the retrofitting process.

The bank is also committed to using 100% renewable energy for its Singapore operations by 2030 and has established a board sustainability committee to provide added governance and oversight of ESG matters.

A growing number of bank clients and investors are now mindful of corporate responsibility, particularly in the area of sustainability.

Banks that are capable of matching sustainability demands and are carbon-neutral while still being profitable will certainly appeal to ESG-conscious customers.  And these customers, especially the millennials, could vote with their feet if their lender doesn’t match their own ESG expectations.

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Surasak Ritthongpitak
Surasak Ritthongpitak
director of the market supervision department
Securities and Exchange Commission Thailand
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