CIMB Group Holdings Bhd group chief sustainability officer Luanne Sieh (left) and CIMB Malaysia and CIMB Bank Bhd chief executive officer Gurdip Singh Sidhu (right).
KUALA LUMPUR: CIMB Group
Holdings Bhd will no longer provide new dedicated financing for upstream oil fields starting from Jan 1, 2025.
This is a part of the bank’s 2030 decarbonisation targets that was unveiled in Kuala Lumpur yesterday.
The group stated this policy applied to upstream oil fields approved for development after Dec 31, 2021. To assist its oil and gas (O&G) clients in their decarbonisation efforts, CIMB will also be reducing the Financed Emissions Lending Intensity of its O&G portfolio by 16% by 2030.
CIMB is the first local bank to complete its 2030 decarbonisation target setting for high-emitting sectors. This is part of its broader 2050 net-zero commitments that include thermal coal mining, cement, palm oil and power.
Another sector was real estate, where the group has announced its target to reduce the operational emissions intensity of its commercial real estate portfolio by 34% by 2030.
Addressing concerns on whether this means the bank will drastically shift away from certain clients, CIMB Malaysia and CIMB Bank chief executive officer Gurdip Singh Sidhu said it will not be the case.
“We are taking a very consultative and collaborative approach. When we were coming up with these targets, for critical sectors like O&G and palm oil, we engaged with industry players, bodies and major clients to align our targets with their trajectories and plans.
“Moreover, for all sectors, with the exception of coal, our total outstanding financing with clients is expected to increase leading up to 2030.
“So, to say that we think by doing this (setting targets) it may negatively affect our business growth, that will certainly not be the case because we are projecting growth in all those sectors,” he said during the CIMB Sustainability Roundtable 2024.
CIMB has also updated its previously published white paper detailing its decarbonisation plans, delineating sector-specific pathways and immediate strategies for all six sectors, which collectively accounts for 60% of its financing portfolio emissions as of 2023.
Gurdip, who also oversees the overall group sustainability efforts in CIMB, said many corporations are already feeling the push towards greener operations due to mechanisms like the Carbon Border Adjustment Mechanism (CBAM).
“Many of our clients exporting to Europe will soon realise, if they haven’t already, that their products could become marginally less competitive compared to those of producers in other countries with greener operations.
“This is because products exported from Malaysia may incur higher carbon taxes under the European Union’s regulations,” he said.
Nevertheless, Gurdip contends that to assume there would not be any challenges, both internally and externally, in the implementation of the targets would be overly optimistic.
“We do not foresee internal challenges, like our bankers choosing not to subscribe to this pathway and giving out loans to the coal sector, for example, to be an issue that will curtail us from achieving our targets. We believe we have put enough safeguards in our process,” he said.
“The external dependencies and challenges are the ones that we are not in full control of.
“For instance, the trade off on the balance with a just transition like with the Russia-Ukraine war. The spike in energy prices that took place when the war started created trade-offs between prioritising net-zero goals and securing energy supplies, be it clean or not so clean,” he said.
Even so, Gurdip said the group remains confident in the momentum towards sustainability, looking at the pace of progress since the company started its sustainability journey in 2019.
“As we pursue our 2050 goals, we will encounter some speed bumps along the way. However, given that Malaysia is a very big trading country, where exports have a big part, so even if government policies do not move as quickly as what was originally planned, the push and pull factor as a result of things like the CBAM will be a catalyst,” he said.
In addition to the 2030 climate targets, CIMB has increased its sustainable finance target to RM100bil by 2024, surpassing RM86.2bil as of December last year.
Gurdip said that for large corporations, CIMB has launched the sustainability linked loan facility which the group has committed RM3bil to.
“We have deployed a certain chunk of that. This is essentially setting targets for clients. It also acts as an incentive for them to achieve those targets, so that they can get rebates on the interest rates of their loan,” he said.
