On the back of UOB becoming the first Singapore bank to publish a Taskforce on Nature-related Financial Disclosures (TNFD)-aligned sustainability report, its competitor OCBC has vowed to enhance its own nature risk assessment capabilities by the next reporting cycle.
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In its latest sustainability report published last week, OCBC identified agriculture and mining as sectors with the highest nature-related dependencies, and highlighted that its exclusion list already “prohibits the financing of projects that have an adverse impact on nature and biodiversity”.
However, on the same day OCBC released its report, climate finance watchdog Market Forces launched a campaign spotlighting domestic and international banks that have been financing Indonesian mining giant Harita since 2018.
OCBC topped the list with US$635 million in loans since 2018, and was found to have been one of the lenders in 2022 – alongside Singapore banks UOB and DBS – to Harita’s subsidiary Halmahera Jaya Feronikel (HJF), which built coal power plants for its nickel smelters.
The three Singapore lenders did not comment on the loan amounts in response to Eco-Business’ queries, with DBS and OCBC citing client confidentiality. The three banks are all signatories of the Equator Principle, a voluntary framework which guides how financiers manage environmental, social and governance (ESG) risks in large-scale development projects, and reiterated in their replies that they have mandatory requirements on managing ESG risks in their portfolio.
Of the three banks, Eco-Business understands that DBS no longer has exposure to HJF.
While Harita plans to commission a 300-megawatt (MW) solar facility by this year, it is still predominantly using coal power, based on the firm’s investor presentation last August. Almost all of the 890 MW of power it generated is from captive coal power plants, with an additional 1.2 gigawatt (GW) under construction to support the company’s expansion.
Harita’s plans to increase production capacity – 350,000 tonnes of ferronickel and 120,000 tonnes of mixed hydroxide precipitate (MHP) by 2028 – pose significant environmental concerns, warned Market Forces. Ferronickel is used to make stainless steel, while MHP is one of the key raw materials for lithium-ion batteries for electric vehicles (EVs) and energy storage.
OCBC, UOB and DBS – typically seen as banking leaders in the region – all have sustainability commitments and coal restriction policies in place.
OCBC stated in its responsible financing framework that it will not knowingly finance coal-fired power plants in project and corporate financing where the power generation capacity or revenue derived from coal exceeds 25 per cent and 50 per cent for new and existing clients, respectively.
In response to Eco-Business queries, OCBC’s chief sustainability officer Mike Ng said that it is “not pragmatic to expect the production of nickel to be fully powered by renewable energy”, given that hydropower and wind resources are location-specific and not available everywhere, especially in remote areas in Indonesia. The archipelago’s unique geography poses challenges too, he said, and grid connectivity is often beyond the control of companies. Additionally, solar power is intermittent, he said.
“With global demand for nickel for the production of EV batteries projected to increase ninefold in the next 25 years, funding the production of nickel becomes necessary,” said Ng, adding that Indonesia, which has the world’s largest nickel reserves, supplies more than half of the world’s nickel and is vital for the global decarbonisation effort. “In the absence of reliable renewable energy to fully supply the required power for nickel producers, the energy transition inevitably incurs trade-offs.”
On how OCBC reconciles its continued financing of Harita with its stated sustainability commitment and exclusion policies, Ng only reiterated that transactions identified as having high ESG risks are subjected to enhanced due diligence. “We require that our clients comply with applicable local laws and regulations where they operate and have adequate policies and processes in place to manage ESG issues.”
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With global demand for nickel for the production of EV batteries projected to increase ninefold in the next 25 years, funding the production of nickel becomes necessary.
Mike Ng, chief sustainability officer, OCBC
UOB, which – according to the Market Forces report – loaned the next highest amount of US$201 million to Harita in the same period, similarly said that the bank will not knowingly provide project financing to new coal-fired power plants. It also bars new corporate financing for the power generation business of a borrower, where coal accounts for the majority of its total power generation capacity.
“Due consideration for any corporate financing exceptions will, however, be given on a case-by-case basis to clients who have credible, time-bound transitions or diversification plans towards less carbon-intensive sources,” it wrote in its energy sector policy.
A UOB spokesperson told Eco-Business that the bank “remains in line with [its] public commitments on sustainability”. “Our focus is to drive the shift towards renewable and clean energy sources witin the region to support an orderly transition.”
Meanwhile, DBS – said to have provided US$87 million in loans to Harita – has ceased the onboarding of new customers who derive over 25 per cent of revenue from coal and will stop financing existing customers who drive the majority of revenue from thermal coal, except for their non-thermal coal or renewable energy activities, from January 2026. Since 2019, it has also ceased the financing of any new thermal coal mining or thermal power assets.
DBS previously told Eco-Business that it is likely to consider the inclusion of captive coal “under strict conditions”, given the smelters they power produce components that are critical for the energy transition.
Under Indonesia’s green finance taxonomy, captive coal plants starting operations before 2030 are still eligible for sustainable finance if they power facilities that process transition metals like nickel, cobalt and aluminium.
DBS reiterated the lender’s commitment “to enabling Asia’s just transition towards a low-carbon future, which involves facilitating a balance of environmental, social and economic priorities across the region.”
Transitioning from coal to renewables is seen as vital to curtail the environmental impact of the rapidly expanding Indonesian nickel industry. The energy think tank Institute for Energy Economics and Financial Analysis (IEEFA) estimates that without changes to Harita’s emission intensity, its annual emissions will triple by 2028 to 22.45 metric tonnes of carbon dioxide equivalent of emissions (MtCO2e) per year.
Harita has committed to reducing its greenhouse gas emissions by 30 per cent by 2030, against the 2022 baseline. However, its 2023 emissions nearly more than doubled from the previous year to 9.6 MtCO2e.
Harita has since rejected IEEFA’s projections, writing in a press release that IEEFA’s assumption that its emissions intensity is fixed at 2023 levels “is not in line with our actual progress in emissions reduction”.
Harita claimed that its emissions intensity for the group and all subsidiaries has decreased in 2024, and that “detailed, third-party assured data” will be published in its upcoming sustainability report.
It added that the remote location of its nickel processing facility “complicates the integration of renewable energy technologies”. As a result, it is widening its scope to the possibility of integrating hydrogen or biomass technologies as part of its decarbonisation plans, Harita said.
“Nickel remains essential to clean energy transition, medical advancements and various industrial applications. However, nickel processing requires a stable, high-volume energy source that is not yet fully achievable through renewables alone,” it stated.
Running afoul of coal policies?
On Market Forces’ latest findings, Paddy McCully, senior analyst at Paris-based campaign group Reclaim Finance agreed that OCBC’s financing of Harita conflicts with its coal exclusion policy. On the other hand, McCully pointed to a “massive loophole” in UOB’s policy which allows the bank to finance coal companies as long as they have “credible, time-bound transitions or diversification plans,” which he said were not clearly defined; DBS’s coal policy is also worded in an “extremely vague” way as far as it applies to mining companies, he said.
Christina Ng, co-founder and director of think tank Energy Shift Institute, told Eco-Business that “pledging to stop financing new coal power plants while backing nickel smelters that rely on dedicated coal plants does suggest a loophole”.
“One way to close this gap is for banks to tie financing to a commitment that nickel smelters transition to renewable energy. But there must be a clear plan to move away from coal. As I understand it, Harita Nickel has such plans in 2023, but it is unclear what progress they have made and how ambitious those plans are,” said Ng.
This also brings up the question of how existing financing rules define what counts as “sustainable”, she said. “Under the International Capital Market Association’s Green Bond Principles, nickel smelting, regardless of how it’s powered, can qualify as a ‘clean transportation’ project and receive green financing.”
“If taxonomies and industry financing frameworks don’t require absolute emissions reductions as a condition for financing, can they truly be considered transitioning?”
“Singapore banks have made an important effort in publishing sustainability commitments and financing policies,” said Ng, but the latest findings from Market Forces show that “stronger, clearer and more consistent policies are needed to prevent financing that undermine sustainability commitments”.
“At the same time, companies like Harita Nickel, and the government, must also improve the disclosure and transparency of their transition pathways,” she said. At the moment, Ng said that she has seen some banks adopt stricter due diligence frameworks, but not necessarily for transition minerals.
In addition to the widespread documentation of deforestation, pollution, damage of coastal areas and loss of livelihoods, multiple media reports have exposed the poor working conditions at Indonesia Morowali Industrial Park (IMIP) – Indonesia’s largest nickel processing site – over the past few years.
Last month, a tailings storage facility owned by PT Huayue Nickel Cobalt – the world’s largest HPAL project – collapsed, causing the toxic mine waste to flow into the Bahadopi River. The breach was suspected to have flooded facilities at the industrial park and the nearby Labota village, affecting workers and 341 families. Barely a week after, another tailings facility inside IMIP, owned by PT Qing Mei Bang (QMB) New Energy Materials was breached, burying three workers – with one confirmed dead.
In response to previous media queries on environmental and human rights concerns, Harita stated that the group and its affiliated companies “do not cause widespread deforestation that lead to river and sea pollution or negatively impact surrounding residents’ health. It added that any resettlement complies with international standards and local regulations, prioritising the safety and well-being of all relocated individuals.
