SINGAPORE – Singapore’s largest bank, DBS Group Holdings, said it is impractical to cut customers with short-term coal exposure.
DBS announced Friday that it intends to eliminate exposure to thermal coal in 2039.
To achieve this, DBS will stop hiring new customers who earn more than 25% of their revenue from thermal coal with immediate effect. And from January 2026, the bank will no longer finance customers with more than 50% of its revenue from thermal coal, except for its non-thermal coal or renewable energy activities.
Explaining the 50% threshold, DBS CEO Piyush Gupta cited how “impossible” it is to expect major energy companies BP, Exxon Mobil and Shell to significantly reduce their oil business in the next five years.
Piyush Gupta, CEO of DBS Group Holdings.
Bryan van der Beek | Bloomberg | Getty Images
“In the same way, the whole group of conglomerates we deal with, for which coal is part of their business, but increasingly trying to do other things, trying to build a renewable business, trying to get into other forms of activity,” he said Friday on CNBC’s “Squawk Box Asia.”
“For us, we will say we will not deal with any customers if your coal exceeds 50% of the business becomes very difficult and this is just the practical reality. You want to help them do the other things, you want to help them build a wind farm, you want to help them continue and diversify their businesses, you want to help them in the transition, ”said Gupta, a member of CNBC’s ESG Board.
Avoid “ecological washing”
Banks worldwide have come under pressure from shareholders and lobbyists to stop funding coal and play a more important role in promoting sustainability practices among their customers.
Gupta acknowledged that it is “very difficult” to make sure companies are not “washing the green,” a term used to describe a misleading impression of ecological credentials.
Part of the problem is not having a clear framework for measuring how companies are living up to their ESG (environment, sustainability and governance) goals, the CEO said.
ESG is a set of criteria used to measure a company’s performance in areas ranging from carbon emissions to contributions to society and staff diversity.
“The reality is that in many cases we rely on our customers to disclose what they are doing. I can’t physically go to all the mines they have around the world, to all the plants they have around the world,” he said, adding that DBS also uses third-party consultants to audit and verify its clients.
As attention to ESG practices grows, outreach standards are likely to improve, Gupta said.
“So while there will be greenwashing on the sidelines, I think the degree of examination is increasing and this will allow people to feel more and more comfortable that what is being done is really the right thing to do,” he said. .