Saturday, 11 July 2020

DBS launches world’s first Sustainable and Transition Finance Framework and Taxonomy

As part of DBS’ efforts to partner with clients from key industries to transition to a low-carbon economy, DBS published the Sustainable and Transition Finance Framework and Taxonomy.

The world’s first Sustainable and Transition Finance Framework and Taxonomy by a bank will form the bedrock for DBS to engage with clients who are furthering their sustainability agenda. The taxonomy will serve as a reference to guide clients in adapting and building resilience in the face of climate change, resourcing scarcity and addressing critical global issues such as social inequality.

To encourage greater transparency in sustainable and transition economic activities, the taxonomy outlines the way DBS manages transactions that are classified as ‘green’, ‘transition’ and/or contributing to the United Nations Sustainable Development Goals (UN 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.

Tan Su Shan, DBS’ Group Head of Institutional Banking, said that the introduction of this framework reinforces the bank’s efforts to advance sustainable development by facilitating the categorisation, monitoring and reporting of sustainable financing not just in DBS but in the banking industry.

“As a purpose-driven bank, we are constantly looking for ways that our business can leave a positive impact. This framework is an extension of that commitment, with a comprehensive approach that can be summed up in three ‘t’s – transition, transactions and transparency. While pursuing our own sustainability goals, we want to encourage companies to transition towards more carbon efficient operations by considering commercially viable greener alternatives. The second ‘t’ is for the sustainable finance transactions we have completed. We have a track record of almost 100 deals worth $8.6 billion (SGD 12 billion) that were closed and mandated over the last two and a half years. The third ‘t’ is for the emphasis on transparency. We welcome a constructive debate on ways to achieve sustainable development while creating value for all,” Tan explained.

DBS – first Singapore bank to offer transition financing

With the launch of the taxonomy, DBS will also be the first Singapore bank to offer transition financing. DBS will take a prudent, scientific approach to evaluate the transitional qualities of the economic activities and whether clients have a strategy to adapt their businesses to arrive at the ambition of the Paris Agreement.

Yulanda Chung, DBS’ Head of Sustainability, Institutional Banking Group, stated that addressing transition financing is important, as achieving climate goals require a significant reduction of 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. There are many interpretations of what constitutes transition finance. 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 a 1.5-degree temperature increase. Every transitional step towards reducing carbon footprint will make a significant, cumulative difference over time,” Chung said. 

The implementation of the framework will involve robust governance and reporting processes that enable transparency. The framework has also received a second-party opinion from CICERO Green, which has opined on the taxonomy and provided a broad, qualitative review of the climate as well as environmental risks and ambitions.

Re-disseminated by The Asian Banker

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