DBS rolls out sustainable and transition finance framework, taxonomy

Mon, Jun 29, 2020 – 11:16 AM

UPDATED Mon, Jun 29, 2020 – 12:21 PM

DBS on Monday launched a sustainable and transition finance framework and taxonomy, as it partners clients from key industries to transition to a low-carbon economy.

The lender said it is the first Singapore bank to offer transition financing with its latest framework. It will evaluate the transitional qualities of the economic activities, and whether its clients have a strategy to adapt their businesses to be in line with the Paris Agreement.

The Paris Agreement aims to keep a global temperature rise this century well below two degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.

Yulanda Chung, DBS head of sustainability for the institutional banking group, noted that addressing transition financing is important as achieving climate goals requires a significant reduction in carbon emissions.

"In many sectors, clients are realising that decarbonising solutions are at a nascent stage of growth. As a result, solutions may not yet be available at scale due to cost and technological barriers," she said in a press statement.

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"The bottom line is we cannot afford to dismiss clients who carry out activities which are less than 'dark green', but are nonetheless part of the mainstream economy instrumental to getting us below 1.5-degree temperature increase. Every transitional step towards reducing carbon footprint will make a significant, cumulative difference over time," Ms Chung added.

The bank's taxonomy will serve as a reference to guide clients to "adapt and build resilience" in the face of climate change, resource scarcity and address critical global issues such as social inequality, said the bank in a media statement.

To encourage greater transparency in sustainable and transition economic activities, the taxonomy outlines the way DBS manages transactions that are classified as "green", "transition", or if they contribute to the United Nations Sustainable Development Goals (SDGs).

It also summarises a broad list of eligible economic activities – be it the use of recycled plastics for apparel making, or an electricity grid upgrade to enable integration of intermittent renewable energy.

DBS said the taxonomy has received a second-party opinion from independent research-based organisation CICERO Green, which has opined on the taxonomy and provided a broad, qualitative review of the climate and environmental risks and ambitions.

DBS group head of institutional banking Tan Su Shan noted that the bank is introducing this framework as part of efforts to advance sustainable development, by facilitating the categorisation, monitoring and reporting of sustainable financing in the banking industry.

The Monetary Authority of Singapore (MAS) last Thursday proposed guidelines that said businesses not showing adequate management of their environmental risk could be hit with higher borrowingRead More – Source