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Banking industry plays significant role in sustainable finance to fight climate change
After two weeks of deliberations from around the globe on how best to combat climate, COP 26 concluded in November 2021 with results ranging from commitments for billions of investment in climate change and to phase-out coal-fired energy negation in the coming decade.
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fter two weeks of deliberations from around the globe on how best to combat climate, COP 26 concluded in November 2021 with results ranging from commitments for billions of investment in climate change and to phase-out coal-fired energy negation in the coming decade, alongside an increased urgency to control greenhouse gas emission to control global warming below 2 degrees Celsius and ideally at 1.5 degrees Celsius.
As nations pledge to increase financing, financial institutions representing trillions of dollars have been called to commit to tackle climate change. Achieving the pace and scale of green-house gas emissions (GHG) reduction will require significant investment. The International Energy Agency estimated that average annual investments will have to rise from the current $2 trillion to $5 trillion until 2050.
There is obviously a funding gap. Here, financial sector players like Standard Chartered can play a critical role to best channel the funds to where they are needed most, contribute to the emission reduction, and change the way future economies should play out where sustainability is not a mere trend, but the norm.
Climate action pledge
Standard Chartered was one of the first banks in 1997 to incorporate environmental and social considerations in its risk management framework — now a common compliance requirement in more and more markets across the world.
The bank has a strong commitment in the fight against climate change. As part of its aspiration to be the most sustainable and responsible bank in the world, Standard Chartered set up a sustainable finance team in late 2018 and has been actively growing the team and the business across all its major markets. The Bank has mobilized more than US$5 billion in blended finance for public-sector and development-organization clients, as well as raising more than $10 billion in green bonds and advising regulators on relevant matters. In 2020, the Bank committed to USD75 billion in sustainable financing by the end of 2024, to support its clients as they transition to net zero.
Even so, the bank remains committed to encouraging the transition to new and renewable energy sources. By 2024, Standard Chartered will only provide financial services to clients who are less than 80 percent dependent on thermal coal, with the figure falling to below 5 percent by 2030.
Standard Chartered Group has also announced ambitious new targets to reach net-zero carbon emissions from its financed activity by 2050, including interim 2030 targets for the most carbon-intensive sectors, such as thermal coal mining, oil and gas, and power. It also plans to mobilize US$300 billion in green and transition finance by 2030. The group’s approach is based on the best data currently available and aligns with the International Energy Agency’s Net Zero Emissions by 2050 scenario (NZE).
Following the announcement, the bank also outlined the growth of its Energy Transition desk. Standard Chartered’s Energy Transition business will initially encompass carbon trading on the European Union Emissions Trading Scheme (EU ETS) and financial natural gas trading, bringing them together into a single desk.
Under those strong efforts in sustainability and green financing, Global Finance named Standard Chartered the World’s Best Bank in Sustainable Finance in 2019, solidifying the Bank leadership in the area.
Driving the change for a greener supply chain
Standard Chartered comprehends the complexity of climate change mitigation efforts, thus the Banks champions a concerted effort between the financial sector, the governments of the world and the development organizations, including both regional and global bodies.
Moreover, corporations as one of key players in changing how industries behave in response towards climate change, must take ownership of their supply chains, scrutinizing environmental performance and their clients in addition to managing their own footprint. Based on a survey of more than 900 companies’ supply chain priorities, the assessment is based on five indicators: environmental soundness and transparency of direct suppliers, as well as indirect or deep-tier suppliers; financial robustness; flexibility and adaptability; and collaboration and connectedness throughout the ecosystem. Clients can use the results to identify their areas of weakness and seek advice and solutions from the bank to help achieve their goals.
The development of Standard Chartered’s Supply Chain Performance Indicator allows companies to benchmark the resilience and sustainability of their supply chains, based on comparisons with peers across regions and sectors.
The indicator follows the global introduction of Standard Chartered’s Sustainable Trade Finance Proposition, which is designed to help companies implement more sustainable practices across their ecosystems and build more resilient supply chains.
Accelerating adoption through a marketplace with high-quality carbon credits
As economies transition to net-zero and carbon prices rise, investors can shape the future of nature-based solutions by improving the quantity and quality of transactions and delivering social and environmental benefits beyond emissions reduction.
In May 2021, Standard Chartered joined forces with DBS, Singapore Exchange and Temasek to develop a carbon exchange and marketplace, Climate Impact X (CIX); providing companies a marketplace for high-quality carbon credits to address hard-to-abate emissions.
With an initial focus on nature-based solutions, CIX recently completed a first-of-its-kind portfolio auction with 170,000 tons of carbon credits transacted as part of eight natural climate solution projects. Co-benefits include an estimated 55,000 jobs, improvements to education for more than 35,000 students, help to fund 60 medical facilities and infrastructure projects; plus, efforts to protect over 250 threatened species.
Sustainability commitment for Indonesia
Standard Chartered, understanding how emerging markets like Indonesia have become a major force in driving development and fighting climate change, has been rolling out efforts in assisting both the Indonesian government and investors
To support Indonesia’s transition toward more renewable energy generation, Standard Chartered has counted the Cirata Floating Photovoltaic Power Plant in West Java among its portfolios of financed projects. With a capacity of 145 megawatts (MW), Cirata will be one of the largest floating solar projects in Southeast Asia once completed, generating enough electricity to power 50,000 homes and offset 214,000 tons of CO2 emissions, along with creating up to 800 jobs. Standard Chartered’s support is aligned with the Indonesian government target of having 23 percent of its energy mix coming from renewables by 2025 under its Electricity Infrastructure Acceleration Program.
Prior to that, Standard Chartered was the only participating bank in the High-Level meeting on Green Investment Blueprint for Papua and West Papua, including developing carbon financing structures, that happened in February 2020. In June 2021, Standard Chartered took part as a Joint Green Structuring Advisor in the issuance of $750 million in green sukuk from Indonesia.
Not only through high level support, Standard Chartered has also renewed its focus on sustainable financial products, to allow individual clients to take part in investing to a greener planet by launching the world’s first Sustainable Deposit to European investors in May 2019. The time deposit has since been rolled out in Indonesia in April 2021, after being launched in several markets, including Singapore, the United States, Hong Kong.
Through the time deposit, Indonesian investors are able to participate in the bank’s investments and activities that are in line with the United Nations’ Sustainable Development Goals (SDG), including projects on COVID-19 mitigation, food security, renewable energy, access to clean water, as well as climate change adaptation.
Moreover, an array on ESG-based (environmental, social and good governance) has also been introduced to Standard Chartered’s Indonesian clients, including the Batavia Global ESG Sharia Equity USD, Standard Chartered’s first offshore mutual fund product that is actively managed according to (ESG) principles, and BNP Paribas SRI-Kehati Index Mutual Funds, which 0.2 percent of the net asset value from the product is donated to the KEHATI Foundation to support its food security program in Flores, East Nusa Tenggara, through the cultivation of sorghum plants.
When all is said and done, the role of financial institutions such as banks in the fight against climate change is clearer than ever. Standard Chartered’s wide-ranging commitments and solutions are on track to help markets in its footprint, reducing carbon emissions as fast as possible yet without sacrificing the obvious need for development, contributing the effort to put the world on a sustainable path to net zero by 2050.
