In a decision taken at its annual general meeting held recently, the United Overseas Bank (UOB), Southeast Asia’s third-largest finance group and Singapore’s third largest bank, has said that it would stop funding coal powered projects.

Before UOB’s decision to quit funding coal projects, two other big banks from Singapore, OCBC and DBS had taken the same decision in support of sustainable development without fossil-based fuels, according to the statement issued by UOB.

“This is a key step towards aligning their financing portfolios with the Paris Agreement [on climate change],” said Jeanne Stampe, head, Asia sustainable finance for Worldwide Fund for Nature (WWF), in a response to the development.

The decision to quit coal lending by Singapore banks comes in the wake of  a similar move by State Development & Investment Corporation (SDIC), the first major domestic Chinese financial institution to completely exit the coal industry, followed by another such announcement by  Japan’s Mitsubishi UFJ Financial Group (MUFG), the biggest bank in the world outside China.

UOB is not alone in quitting coal lending. To propel its push into emerging markets focused on sustainable financing, Standard Chartered, an international bank listed on the London and Hong Kong Stock Exchanges as well as India’s Bombay and National Stock Exchanges, has created a new sustainable finance banking team operational from January 1, 2019.

In April 2018, HSBC, which is Europe’s largest bank, had significantly restricted its support for coal-fired stations apart from Bangladesh, Indonesia, and Vietnam.

Deutsche Bank too on January 31, 2017, revised its approach to coal financing and amended its guidelines to coal power and mining, with a committed $4 billion to facilitate in clean technology by 2020.

Meanwhile, Mercom reported last year that public sector banks in India funded more coal projects than renewable projects in 2017, whereas, in contrast, private financial institutions invested more in renewable energy projects than coal-based projects.

These findings were published in the latest report issued by the Center for Financial Accountability (CFA), a financial institution monitoring institute. The report profiled 12 coal generation projects with a total capacity of 17 GW which obtained a total of ₹607.67 billion (~$9.35 billion) in loans amounting to 73% of all lending, whereas only ₹229.13 billion (~$3.50 billion) was lent for renewable energy projects in 2017, making up only 27%, Mercom had detailed.

The report said that out of the top 10 coal power projects lenders in India, eight were found to be government-owned banks or financial intuitions: Rural Electrification Corporation, SBI, IIFC, Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank, and Power Finance Corporation. Together, they collectively gave loans of approximately ₹303.37 billion (~$4.5 billion).

A combined report by the Greenpeace, Global Energy Monitor and Sierra Club has shown that financial restrictions by more than 100 institutions worldwide helped see a 20% drop in newly completed coal plants in 2018 worldwide. Coal is expected to account for 40% of Southeast Asia’s energy mix by 2040, as the region’s developing countries, particularly Vietnam and Indonesia, continue to bank on coal, a report from the International Energy Agency has revealed.

With India’s plan to install 175 GW of renewable energy by 2022, grid integration of intermittent renewable energy sources is expected to be a challenge, and the Central Electricity Authority (CEA) recently released a report to address the issues of balancing required by conventional power generators to accommodate renewable sources of energy.

A similar move by banks in India could kick start renewable projects which are struggling to find financing in a difficult environment.