DBS’ emission targets to drive improved emission disclosure in SEA
The move is expected to improve the quantity and quality of data disclosures on GHG.
DBS’ latest released decarbonisation targets are expected to not just improve the bank’s greenhouse gas (GHG) emission disclosure but also affect Southeast Asian companies at large, according to Fitch Ratings.
DBS Group recently published emission reduction targets for 7 sectors and GHG data coverage targets for two sectors. These nine sectors represent just 31% of the bank’s outstanding loans, but the majority of the financed emissions from its institutional banking group.
The move is expected to improve the quantity and quality of data disclosures on GHG emissions by Southeast Asian companies, the rating agency said.
“DBS’s strategy will increase climate data from unlisted companies in the region that are now not subject to mandatory disclosure by the Singapore Exchange Limited or other stock exchanges. While disclosures from these companies will remain voluntary, we expect DBS’s engagement with its clients to incentivise greater emission accounting, reduction and public reporting,” Fitch added.
The banking services that DBS now applies could help catalyze the development of Singapore’s sustainable and transition finance sector, in particular sustainability-linked bonds and loans.
“Transition financing raises funding for borrowers in "hard-to-abate" sectors to reduce their emissions,” Fitch said, noting that for these companies, traditional sustainable finance may not be an avenue to them previously due to their carbon intensity and challenges to decarbonise.
Amongst the nine sectors covered by DBS, real estate was particularly noted by Fitch as it makes up 40% of the bank’s loans as of end-June. With energy efficiency rules for buildings expected to tighten in the coming decade, DBS achieving its goals will require significant investments in building retrofit, both in Singapore and across other markets that the bank’s clients are active in, the ratings agency added.
DBS’ latest move may also influence the food and agribusiness sector by encouraging its clients to improve emissions reporting, which in turn will pave the way for setting emission reduction goals, Fitch added.
“This also aligns with our view that food and agribusiness has been largely excluded from climate policies because of the difficulty in monitoring emissions and policymakers’ concerns about food security and inflationary pressure, among others. This leaves some subsectors vulnerable to a likely accelerated push to emission reduction in agriculture in the coming years, particularly livestock,” it said.