By Fabiana Negrin Ochoa


United Overseas Bank Ltd. has set new carbon-reduction targets and pledged to stop financing thermal coal, becoming the latest bank in Singapore to clarify its path toward net zero.

The lender's targets cover six sectors that comprise about 60% of its corporate lending portfolio, it said Monday.

The sectors--power, automotive, real estate, construction, steel and oil & gas---were chosen for their carbon-emissions intensity, and materiality to UOB's portfolio, "and therefore the amount of influence we can have," Chief Sustainability Officer Eric Lim said at a press briefing.

The bank set specific targets for each sector, which generate the bulk of its financed emissions, aiming to sharply lower their carbon-emissions intensity--the volume of CO2 relative to a specific activity or output. For power, real estate and construction, UOB aims for reductions ranging from 85% to 98% by 2050. It set a 100% goal for the auto sector and has interim 2030 targets for all sectors to gauge progress.

For oil & gas, UOB will immediately stop financing upstream projects. It didn't set a carbon target, noting the complexity of shifting away from fossil fuels without jeopardizing economic development and livelihoods.

"Within the region, we haven't as a collective community...figured out the most effective way to transition out of oil and gas. So we made the strongest commitment we know how to make, which is limiting new supply," Mr. Lim said. "What we're trying to do is help phase out the use of oil and gas across various sectors, power, automotive, even in construction...that's how we think about addressing the downstream."

UOB has also committed to exiting thermal-coal financing entirely by 2039.

The bank's approach centers on helping clients transition, rather than just exiting carbon-intensive sectors, and balancing economic growth with decarbonization.

In the auto sector, for example, that includes supporting clients' shift toward electric vehicles, while in steel UOB aims to back research into so-called green steel and carbon-capture tech, Mr. Lim said.

The strategy is in line with guidance from regulators like the Monetary Authority of Singapore, which cautions against cutting firms off from financing prematurely and depriving them of the chance to transition, UOB said.

It is also in line with the approach taken by fellow Singapore lenders DBS Group Holdings Ltd., which set its own sector-specific emissions targets in September, and Oversea-Chinese Banking Corp., which committed to setting targets earlier this month.

"The Singapore banks have been moving ahead of regulatory requirements," said Willie Tanoto, director of Asia-Pacific banks at Fitch Ratings, noting that the setting of interim 2030 targets subjects them to public accountability.

Mr. Tanoto added that UOB's targets not only reflect growing stakeholder expectations for more sustainable lending, but are pragmatic paths to mitigating transition risks for the most carbon-intensive sectors it lends to.

UOB's commitments could also have a market upside, said Thilan Wickramasinghe, Singapore head of equity research at Maybank Investment Banking Group.

"UOB's large and integrated Asean footprint, together with this plan of integrating net zero into its business strategy could become a critical success factor that should offer significant market-share opportunities," Mr. Wickramasinghe said in an email.


Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com


(END) Dow Jones Newswires

10-31-22 0612ET