Beginning 1 January 2025, Southeast Asian banking group CIMB will cease financing new upstream oil fields which were approved for development after 2021.
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The decision was announced on 3 July as part of the bank’s new climate targets for the upstream oil and gas sector across all its markets, including Malaysia, Indonesia, Thailand and Singapore.
By 2030, CIMB aims to slash 16 per cent of the financed emissions lending intensity of its oil and gas portfolio by 2030, from a 2022 base of 694 tonnes of carbon dioxide (tCO2e) per million ringgit of financing to 583 tCO2e per million Malaysian ringgit of financing. Financed emissions lending intensity refers to the emissions produced for every dollar that CIMB loans to clients, explained group chief sustainability officer Luanne Sieh.
“[Our oil and gas sector] target encompasses Scope 1, 2 and 3 emissions originating from pure-play upstream exploration and production companies as well as integrated oil and gas players,” said CIMB. Oil and gas financing accounts for 3.8 per cent of the banking group’s financed emissions.
“We want to focus on upstream [oil and gas] because that is where supply is coming from. If we cut off supply, then global [oil] production automatically drops,” said Sieh at a media briefing. She explained that the bank is focusing less on targets for traders and ancillary services because these players don’t have as much of an impact or influence on supply.
CIMB’s targets are based on the International Energy Agency’s scenario for net-zero emissions by 2050 (IEA NZE) and enhanced using the agency’s Sustainable Development Scenario (SDS). Sieh pointed to the IEA’s projection that no new upstream oil and gas projects with long lead-times are needed based on its updated net zero scenario. The IEA projection sees fossil fuel demand declining 25 per cent by 2030 and 80 per cent by 2050.
However, this target is based on an interpretation of the IEA NZE scenario supplemented with pathways from the older, discontiued IEA SDS, said Bernadette Maheandiran, acting chief executive officer of investment watchdog Market Forces. “It is inappropriate for CIMB to base its financed emissions target on a scenario that’s no longer being updated and which doesn’t reflect today’s energy landscape,” she told Eco-Business, suggesting that the emissions reduction target is “woeful [and] out of step with the climate goals of the Paris Agreement.”
Sieh explained to Eco-Business that CIMB had adapted the SDS pathway to the most recent update of the IEA NZE scenario as only the SDS provides a granular breakdown of emissions pathways by region. “Since the NZE only offers a global pathway, we had to adapt it to provide a more relevant reference for Asean, which is where our business is,” she said.
How CIMB calculated its oil and gas emissions target
Both the International Energy Agency’s discontinued Sustainable Development Scenario (SDS) and recently updated scenario for Net Zero Emissions by 2050 (NZE) offer a pathway of maximum allowable emissions at a 5-year interval from 2020 to 2050.
CIMB used the following calculation to obtain an updated share of allowable emisisons for the Southeast Asian region:
1. SDS’ allowable emissions for Southeast Asia (A) was divided by the SDS’ allowable global emissions (B) to obtain the ratio of allowable emisisons for Southeast Asia (A:B)
2. This ratio was applied to the NZE’s allowable emissions at each 5-year interval (C), resulting in the updated emissions allowed for the region (A:B multiplied by C)
However, she acknowledged that the SDS assumed that the global temperature would rise by 1.8°C, which was not ambitious enough to meet CIMB’s 1.5°C commitment. As such, Sieh and her team mapped the maximum allowable emissions for Asean, based on the older SDS scenario, to work out the 1.5°C-aligned pathway for the region.
Committed to gas
CIMB also said it would continue to support natural gas activities, given Southeast Asia’s reliance on gas as a transition fuel. “This is especially crucial in reducing dependence on coal within the power sector and ensuring energy security through self-sufficiency in the short term,” the bank said in its statement.
However, the bank’s decision to continue financing gas projects suggests it is taking a less aggressive approach to decarbonisation, given that renewable energy sources are increasingly cost-competitive and viable without the need for fossil fuels, said Warda Ajaz, project manager for the Asia Gas Tracker at non-profit research outfit Global Energy Monitor. He pointed out that alignment with the Science-Based Targets Initiative (SBTi) or Paris Agreement typically involve commitment to the most rigorous and internationally recognised standards for emissions reduction. “Without this alignment, concerns about the ambition and credibility of CIMB’s decarbonisation strategy can persist, especially given the growing emphasis on aligning corporate targets with global climate goals,” he said.
CIMB’s strategy indicates a cautious transition but also reflects a hesitancy to fully commit to renewables, which could undermine its overall sustainability goals in the context of rapidly advancing renewable technologies, Ajaz told Eco-Business.
Maheandiran also raised concerns about CIMB’s commitment to financing gas expansion in Southeast Asia. “Large-scale gas projects seeking finance in Asia today aren’t designed to transition countries away from coal. They are aimed at locking countries into decades of dependence on the fossil fuel industry hellbent on expansion at all costs,” she said.
But Gurdip Singh Sidhu, chief executive officer of CIMB Malaysia and CIMB Bank Berhad said that the bank is intent on moving towards cleaner energy sources in the longer term. Its current approach ensures that CIMB will not be dropping clients “in a drastic way”, but will take a collaborative approach with existing upstream oil and gas clients, he said. “Even when we were coming up with our sector targets, especially for palm oil and oil and gas, we spent a lot of time [consulting] not just with industry bodies but speaking specifically to some of our big clients.”
To meet its new sector emissions target, CIMB plans to help its existing oil and gas clients diversify away from oil to other, cleaner businesses. The bank will also support clients in reducing emissions from oil fields that are currently operational, said Sieh. CIMB’s 2030 emissions target for the oil and gas sector does not assume that carbon capture, utilisation and storage (CCUS) technology will be used, but the bank is exploring opportunities to fund such projects, said Sieh.
Real estate emissions targets
CIMB also announced climate targets for its commercial real estate portfolio on 3 July, aiming to reduce operational emissions intensity by 34 per cent to 77 kilogrammes of CO2e per metre square of gross floor area by 2030. It aims to meet this by actively financing the development, retrofitting, and maintenance of more energy-efficient buildings, including onsite renewable energy installations such as rooftop solar photovoltaic and energy storage.
However, Sieh acknowledged that decarbonising the bank’s real estate portfolio is subject to dependencies in other sectors, such as emissions embodied in raw materials like cement and steel as well as electricity grid decarbonisation. CIMB’s latest targets assume a power grid decarbonisation rate aligned with the IEA’s announced pledges scenario.
In 2022, CIMB set a target to reduce the emissions intensity of its power portfolio by 38 per cent by 2030, aiming for an emissions intensity of 272 kilogrammes of carbon dioxide equivalent per megawatt hour generated. According to Sieh, the group is on track to meet this target.
Timothy Colyer, partner and head of climate and sustainability for Asia Pacific at management consulting firm Oliver Wyman said: “In my experience, banks setting net zero targets really does matter. Every time a large financial institution says ‘We believe this is going to happen and we’re going to commit our own financing in this direction’, it provides a bit of extra certainty [to firms that are mulling new decarbonisation or climate-related technology or solutions],” he said.
Following the new climate targets for the oil and gas and real estate portfolios, CIMB is now the first Malaysian bank to complete its 2030 decarbonisation target setting for high emitting sectors. It previously announced emissions targets for thermal coal mining and cement in 2020, and palm oil and power last year. All six sectors collectively accounted for 60 per cent of the banking group’s financing portfolio emissions in 2023.
CIMB is the first bank in oil-producing Malaysia to announce climate targets for the oil and gas sector. Other regional banks which have announced plans to end upstream oil and gas financing include Singapore’s United Overseas Bank, although its pledge only covers projects approved for development after 2022.
