Co-published by BankTrack/Reclaim Finance

Financing decisions play a critical role in driving the energy transition by stimulating investments in clean energy while divesting from fossil fuels. Yet, banks’ policies lag behind in addressing a pressing issue: how to invest effectively in the early retirement of coal power plants? With over 2,400 such plants still in operation, thousands will have to be retired before their designated end date to preserve hope for the 1.5ºC Paris target (1). 

When Singaporean bank DBS released its 2023 Sustainability Report on 5 March 2024, the media praised the bank for being the first in Southeast Asia to support the early retirement of coal within its updated thermal coal policy (2). However, a closer look at the updated policy shows that the bank’s commitment to coal retirement is weak at best, and is lacking fundamental aspects of a strong coal policy, such as excluding financing for coal companies and ruling out finance for coal expansion.

No clear commitment to coal phaseout

Like most international banks, DBS already had a thermal coal policy that included a deadline for zero coal exposure by 2039. DBS’ updated policy includes a new commitment to “leverage regional and market taxonomies to achieve meaningful decarbonisation in sectors which remain reliant on thermal coal”, alongside mention of its role as the financial advisor for the first early retirement of a coal power plant, Cirebon-1, in Indonesia, and involvement in other working group discussions (3).

However, having a thermal coal policy that only relies on taxonomies is insufficient. Regional and national taxonomies in Southeast Asia contain inconsistent positions on coal, with the Singapore-Asia Taxonomy being the most ambitious, while others do not refer to coal’s early retirement at all (4). What is worse is that some of the market taxonomies in the region, such as Indonesia’s, even indirectly support coal’s continued expansion through the classification of certain types of coal power development (off-grid captive coal plants powering industrial facilities) as a “transition” activity (5). 

While DBS underscores its intention to align its practices with existing taxonomies, the result is that DBS’ criteria and commitment for coal retirement is unclear (6). Financiers should be guided by Reclaim Finance’s ten guiding principles for coal retirement to ensure that the early retirement of a coal asset aligns with 1.5°C pathways, prioritizes renewables, avoids false carbon-based solutions and retrofitting delays, and is socially and environmentally just. 

For example, DBS must provide greater clarity on how its role as financial advisor for the Cirebon-1 coal plant will take into account provisions for social and environmental remediation at the Cirebon site. This must include having safeguards in place for transparency and accountability of the phaseout transaction, as well as consulting with local communities who have suffered severe health and livelihood impacts from the plant’s pollution (7). 

Real coal phaseout means no more lending to coal expansion companies

Despite its coal phaseout intentions, DBS remains a financier of major coal clients and developers. Reclaim Finance’s Coal Policy Tracker has detailed recommendations for how it can close this loophole (8). For example, when deciding whether to finance clients, the bank should consider how much of their power generation, instead of revenue generation, comes from coal. This would halt finance for large, diversified companies that generate revenue from a range of sources, despite expanding coal capacity. 

These loopholes have major, real world consequences. In the same week that DBS launched its Sustainability Report, it underwrote a bond issuance by Adani Green Energy, a subsidiary of the world’s largest private coal developer, the Adani Group (9). Adani Green is accused of being the Adani Group’s greenwashing vehicle, used to attract finance for other parts of its business, including coal expansion projects (10). DBS cannot credibly claim to be a regional leader on coal phaseouts while lacking a policy to stop corporate financing of coal companies – let alone the world’s largest private coal developer that is dogged by allegations of corruption (11).

If DBS wants to position itself as a leader in the region for coal phaseouts, then it must make explicit commitments to only finance phaseouts that are 1.5°C-aligned and to repair harms caused by existing coal plants. At the same time, the bank must strengthen its thermal coal policy to stop financing of coal developers at the corporate level immediately. Paying lip service to early retirements through the vague commitment to non-interoperable market taxonomies should not be considered a phaseout criteria or policy.

Notes: 

1. Statista. Number of operational coal plants worldwide. July 2023. New initiatives led by international organisations and private sector coalitions have sprung up to address the financing of early coal phaseouts. These include the private financial institution alliance, the Glasgow Financial Alliance for Net Zero (GFANZ)’s work on Financing the Managed Phaseout of Coal-Fired Power Plants in Asia Pacific, the Coal-to-Clean Credit Initiative, and the World Bank’s Coal-to-Clean Transition Fund. 

2. See coverage in Eco-Business, Business Times, and Responsible Investor positioning DBS as the first bank in the region to include phaseouts in its thermal coal policy. DBS’ Sustainability Report is available here. 

3. The comparison was made between DBS’ latest coal policy contained within its 2023 Sustainability Report (p. 22), matched on the bank’s current sustainability webpage, and DBS’ Approach to Sustainable Financing (p. 13) published in March 2022. DBS clarified directly with Reclaim Finance that both documents apply to their overall coal policy.

4. Monetary Authority of Singapore (MAS). Singapore-Asia Taxonomy for Sustainable Finance, 3 December 2023; the Bank of Thailand’s Thailand Taxonomy: A Reference Tool for Sustainable Economy, 5 July 2023, does not refer to coal phaseouts at all.   

5. See reporting on the inclusion of captive coal in Indonesia’s taxonomy in Green Central Banking, and the full taxonomy here (in Bahasa Indonesia); CREA’s report ‘Dark Clouds on Indonesia’s Clean Energy Horizon’, and BankTrack’s report ‘Coal Havens’  highlight that captive coal is still a loophole in coal finance. In response to media queries, DBS said that captive coal was an “interesting discussion”.

6. This is in contrast to some other banks that have coal policies that explicitly highlight early coal retirement in line with decarbonization targets. For example, HSBC’s coal policy includes the “early retirement…or refinancing of thermal coal assets to materially reduce greenhouse gas emissions” as an exception to their coal policy that would require internal approvals. Barclays' coal policy allows the “financing for decommissioning plants for those unable to transition” as an exception. 

7. See a position paper published by an NGO coalition raising environmental and social issues around the Cirebon 1 coal power plant. 

8. While it is good that DBS accounts for 100% of the facilitated emissions from debt and equity capital markets’ activities, the bank’s reporting on power sector emissions is undermined by relying on the fundamentally flawed ‘emissions intensity’ metric (i.e. measuring the volume of emissions per financing unit) (12). The use of absolute emissions is a more faithful representation of climate impact, which DBS already uses for the oil and gas sector.  

9. Bloomberg. Adani Bond Gains in Trading Debut Boosted by Global Demand. 5 March 2024; Toxic Bonds Network. Investors and banks financing Adani’s ‘green bond’ fail first litmus test post-Hindenburg. 4 March 2024. 

10. Toxic Bonds Network. Adani Green? All investments lead to coal. 2 June 2023.

11. The bank declined to comment on its Adani finance during its press briefing for the launch of their Sustainability Report on 5 March 2024. A week later, reports emerged that US prosecutors and investigators in the Justice Department have widened a probe into bribery on behalf of another Adani renewable subsidiary. Source: Bloomberg. US Probing Indian Billionaire Gautam Adani and His Group Over Potential Bribery. 15 March 2024.