OCBC Bank announced June 22 that it has set an ambitious new target of S$25 billion (US$17.91 billion) by 2025 for its sustainable finance portfolio, having surpassed its original S$10 billion target in the first quarter of 2020 – two years ahead of its 2022 schedule.
The bank has seen a significant increase in the demand for sustainable financing in recent years due to better awareness and heightened efforts to combat climate change. Last year, it witnessed a strong demand for green and sustainability-linked loans. Of the more than 20 such loans that the bank participated in, it acted as sustainability advisor or coordinator for more than 10 of them.
Solid progress was also made in the financing of renewable energy projects, following the bank’s announcement in April 2019 that it would no longer finance new coal-fired power plants. In 2019, the bank participated in solar, onshore and offshore wind projects in Taiwan, China, the United Kingdom, Australia, and Malaysia.
“We believe our “25-by-25” target defines our commitment in addressing the challenges presented by climate change, and in contributing to the achievement of the United Nations Sustainable Development Goals,” says Mike Ng, head of structured finance and sustainable finance, OCBC Bank. “As our clients continue to incorporate sustainability into their business models and corporate strategies, we expect the sustainable finance momentum to gather even more pace.”
In order to reach its 25-by-25 target the bank intends to focus on driving growth in both industry and geographical diversification. Renewable energy, clean transportation, education, water and waste management are industries with high growth potential, with government support playing a big role, and the bank has already made inroads into clean transportation and education.
In January 2020, the bank expanded its sustainable finance portfolio to the transportation sector with an A$25 million (US$17.18 million) green loan to ComfortDelGro Corporation for the financing of 50 hybrid buses in Victoria, Australia. In May 2020, it acted as green finance adviser for National University of Singapore’s green finance framework, which provides the overarching criteria and guidelines for NUS to enter into green finance transactions.
In terms of geographical diversification, Singapore has been developing its capabilities as a regional sustainable finance hub, and businesses around the region – from Myanmar to Malaysia, Taiwan, Hong Kong, Korea, Japan, and Australia – are increasingly looking to tap on this expertise and the bank is ready to leverage its international network of branches and offices in these countries to expand its business.
In early 2020, the bank partnered with Shwe Taung Group on Myanmar’s first green loan – a US$44 million green loan – to be used for the financing of Junction City Shopping Centre, an integrated retail and commercial development in downtown Yangon. Then in May 2020, it partnered with telecommunications company Axiata Group Berhad on the first sustainability-linked Islamic financing undertaken in Malaysia worth US$800 million.
Sustainable finance’s strong growth momentum is expected to continue over the next few years despite Covid-19, and with further development of the sustainable finance ecosystem, the bank anticipates that more industry players in the region will join the bandwagon sooner rather than later.
