Singapore banks are leading the way in sustainable financing among advanced economies in Asia, according to a recent report by sustainability-focused consulting firm Asia Research and Engagement (ARE). The report, which assessed the climate goals of nine banks in Singapore, Japan, and South Korea, highlighted the ambitious decarbonisation strategies of Singapore’s top financial institutions—DBS, OCBC, and UOB.
The report ‘Shifting Gears: Key Asian Banks Can Accelerate the Energy Transition’, found that these three Singaporean banks are the only ones in advanced Asia to have set both medium- and long-term targets for reducing financed emissions in key carbon-intensive sectors. These targets align with the global goal of limiting warming to 1.5 degrees Celsius. The banks also have the most detailed policies to reduce emissions in the oil and gas sector, with OCBC and UOB pledging to cease financing for the upstream portion of the value chain, while DBS has set a 2050 target to reduce absolute financed emissions in the sector.
Additionally, Singapore’s banks stand out as the only ones in the region to include facilitated emissions—those from off-balance-sheet capital market services and transactions—in their net-zero-by-2050 commitments. “The Singapore banks’ plans represent the most comprehensive among Asian banks to align financing of carbon-intensive industries with global benchmarks such as the International Energy Agency’s net-zero emissions scenario,” the report stated.
In contrast, banks in Japan and South Korea have set narrower and less detailed sectoral targets. For example, Japan’s three major banks—Mizuho, MUFG, and Sumitomo Mitsui—have only established 2030 targets for key carbon-intensive sectors, and these targets are not aligned with a 1.5-degree scenario. The South Korean banks assessed—Hana, KB, and Shinhan—have not set any targets for the oil and gas sector.
While the Singapore banks lead in several areas, the report noted that they, like their Japanese and South Korean counterparts, have not committed to a deadline for ending financing for the oil and gas sector altogether. This includes both upstream drilling and production as well as downstream refining and processing.
DBS has set ambitious targets to reduce absolute financed emissions in the oil and gas sector by 92% by 2050, compared to 2020 levels. These targets cover upstream, downstream, and integrated companies. OCBC aims to cut absolute financed emissions by 95% by 2050 from its 2021 levels, focusing on upstream and integrated companies. UOB, having ended financing for upstream oil and gas, has not set a specific reduction target for the sector’s financed emissions but has focused on phasing out financing for downstream oil and gas through restrictions on related sectors, such as power and automotive.
The report highlights that DBS and OCBC have made the most progress in phasing out fossil fuel financing, particularly through their commitments to end thermal coal financing. However, it also points out that by targeting emissions reductions rather than financing itself, these banks leave open the possibility of continuing to finance fossil fuel activities if emissions are mitigated through technologies like carbon capture and storage or direct air capture.
ARE recommended that all nine banks establish clear policies on new upstream oil and gas projects and develop long-term strategies for oil and gas financing that cover the entire supply chain, from upstream to downstream. It also advised tightening policies on thermal coal financing to ensure a complete withdrawal from corporate financing of coal companies and eliminate loopholes.
The report concluded that banks in Japan, Singapore, and South Korea are well-positioned to lead the region’s energy transition but must accelerate their efforts to meet the goal of net-zero emissions by 2050. “Banks should decisively accelerate efforts to decarbonize finance to capture opportunity and avoid the risk that falling fossil fuel demand and regulatory shifts render fossil-fuel-related assets obsolete. They need to urgently accelerate efforts to achieve a low-carbon future. While they have taken promising steps, they will need to go much further to support a timely energy transition” the report added.