Driving the future of Asia’s energy sustainability

Written by Yulanda Chung, Head of Sustainability, Institutional Banking Group, DBS Bank

Lead the charge towards a cleaner, greener and more energy-independent tomorrow.

Sustainability as a solution

Every sector has seen repercussions of COVID-19, but none has been as immediate as the global fall in energy usage. Remote working arrangements, social distancing and lockdowns have dramatically curtailed energy usage with the demand for oil, coal and natural gas heading towards its biggest decline in recent years. While traditional energy consumption has fallen, renewable energy is standing out as a resilient energy source, with a likely flatline contribution to the global grid, thereby increasing its share of the overall energy market in most countries.

Between 2016 and 2019, global energy CO2 emissions grew by over 1.3 GT. The Asia-Pacific region accounted for three-quarters of this global total and its energy demand is expected to double by 2030, propelled by rapid urbanisation and population growth. However, there is a growing chasm between the region’s energy infrastructure and what is required to meet future needs. If the situation persists, this energy gap will continue to widen, contributing to other socio-economic challenges and deepening inequality. The region needs innovative technologies and solutions that can generate power in a socially, economically and environmentally sustainable manner.

Leading the sustainability charge

To do this, Asian countries are striving to make a change, with their financing policies being critical parts of the puzzle. Currently there are three sovereign green bond issuers in Asia – Indonesia, Korea and Hong Kong. In addition, 90% of Asian investors have accelerated their effort to invest sustainably over the past three to five years.

In Singapore, DBS is aiming to bridge the energy gap and act as a catalyst for a cleaner, greener and more energy-independent tomorrow. To do this, DBS has completed 29 renewable projects across Asia worth nearly SGD3.6 billion and has arranged over 100 sustainable financing deals worth SGD15 billion – including sustainability-linked and green loans. Financing renewable energy projects sits at the core of DBS’ agenda. As an Asian bank, a deep understanding of the region, strong regional connectivity and a market leading position in Asia’s project finance space are all advantages that DBS has harnessed to help to drive a more sustainable and equitable future in the region.

According to the Boston Consulting Group, Asia-Pacific as a whole is expected to draw up to $250 billion more in renewable investments from now to 2025. It helps that generating renewable energy in key Asian markets is more cost competitive than anywhere in the world, further increasing feasibility. In Singapore’s context, DBS’s efforts can also be seen in their role as the lead coordinator for the debt financing and Mandated Lead Arranger (MLA) for the Star Energy-led consortium’s winning bid for the acquisition of Chevron’s biggest geothermal assets in Indonesia, Salak and Darajat. These assets have been in operation since the 1990s, and each of them is underpinned by a take-or-pay Energy Sales Contract with PT.PLN(Persero), which has monopoly over electricity distribution in Indonesia. DBS, as the international bank coordinator, assisted in leading, guiding and helping the parties understand a series of complex issues as well as promptly supplying acceptable solutions. The five-year US$1.25 billion debt was eventually refinanced by US$1.11billion worth of green project bonds issued on 14 Oct 2020.

Looking towards the future

In addition, as part of DBS’ efforts to partner clients from key industries to transition to a low-carbon economy, DBS published the world’s first Sustainable and Transition Finance Framework and Taxonomy . This forms the bedrock for DBS’ engagement with clients keen on furthering their sustainability agenda. It will serve as a reference to guide clients to adapt and build resilience in the face of climate change, resource scarcity and address critical global issues such as social inequality. 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.