Singapore’s OCBC Bank has unveiled decarbonisation targets for its ship finance activities as part of a wider initiative targeting carbon-intensive industries.
South East Asia’s second-largest lender aims to achieve a target metric or “alignment delta” at or below zero by 2030 for shipping.
Alignment delta is based on emission intensity or the emissions per unit of output. The targets are expressed in percentage terms to measure how far above or below the reference pathway the emission intensity is.
OCBC has also set decarbonisation targets for power, oil and gas, real estate, steel and aviation.
The six sectors make up 67% of its corporate and commercial banking loan portfolio, but only 42% of the portfolio falls within the scope of targets.
The targets are aligned to internationally recognised, science-based pathways geared towards achieving a net zero level of greenhouse gas emissions by 2050 to limit global warming to 1.5C, OCBC said.
They will be reviewed periodically, at least once every five years, as climate science evolves and more data from clients becomes available.
“Our sectoral net zero targets are ambitious, quantitative and grounded in science,” said OCBC Bank group chief executive Helen Wong.
“Beyond the numbers, this exemplifies key aspects of our vigorously partnership-based approach. I firmly believe that a more sustainable world can be created so long as we are united with our clients and communities in pursuing one.”
OCBC also announced that it will not extend project financing to upstream oil and gas projects that obtained approval for development after 2021.
This is on top of the target of a 35% reduction in absolute emissions by 2030 for the oil and gas sector that the bank has set.
Although OCBC is not among the top ship finance banks in the world, it has worked with several top shipowners including GasLog, U-Ming and BW LPG.
It was the first South East Asian bank to become a signatory to the Poseidon Principles in December 2021 and is still the only bank in Singapore to join the initiative.
Singapore’s two other large banks, DBS Bank and UOB, set out shipping decarbonisation targets last year.
However, DBS reported this year that it had missed the “glide path target” it had initially set for its ship finance activities.
In 2022, the weighted emissions intensity of its shipping portfolio was 5.4% above the recommended target, a reversal from 11.8% under the recommended target in 2020.
The bank attributed this to the addition of a “small group of financed vessels that belong to a business segment with shorter trading routes”.