CIMB establishes Scope 3 financed emissions baseline towards achieving Net Zero ambition; sets interim sector climate targets for thermal coal and cement
28 September 2022
CIMB becomes the first Malaysian bank and second in ASEAN to announce such concrete 2030 sector targets which will enable it to set transition pathways towards achieving its Net Zero goal. It has also set internal carbon pricing which will support its Scope 1 and 2 net zero by 2030 commitment.
Kuala Lumpur: CIMB Group Holdings Berhad (“CIMB” or “the Group”) today announced that it has established baseline Scope 3 financed emissions in its Malaysia and Indonesia businesses towards designing transition plans that will enable the Group to achieve its target of Net Zero overall greenhouse gas (“GHG”) emissions by 2050. The baselining encompasses financed emissions of on-balance sheet financing for the Group’s Wholesale, Commercial and Consumer segments in Malaysia and Indonesia, the two largest markets for the Group.
For 2020, CIMB’s financed emissions stood at around 9,200 kilotonnes of carbon dioxide equivalent (“ktCO2e”) and covers 40% of CIMB Group's gross loans. This was based on the analysis of nine carbon intensive sectors as defined in the Guidelines for Climate Target Setting for Banks by the Collective Commitment to Climate Action (“CCCA”) under the United Nations Environment Programme Finance Initiative (“UNEP FI”), and four specific asset classes set out in the Partnership for Carbon Accounting Financials (“PCAF”) methodology. The Group is in the process of augmenting the scope of its financed emissions baseline to cover its other main operating markets, sectors and asset classes by end-2022.
By baselining its Scope 3 financed emissions, CIMB will be able to establish interim climate targets and design appropriate transition plans for carbon intensive sectors towards achieving Net Zero. With the baseline in place, CIMB has set its first round of 2030 climate targets for two sectors – thermal coal mining and cement – becoming the first Malaysian bank and second ASEAN bank to publish such concrete targets in alignment with globally recognised 1.5°C climate scenarios.
Starting from its end-2021 position, CIMB aims to halve its financing and investment exposure to the thermal coal mining sector by 2030 as an interim target for the Group’s commitment to phase out coal from its portfolio by 2040. Similarly, CIMB aims to reduce the physical intensity of financing clients in the cement sector by 36% from 0.72 to 0.46 tonnes of CO2 equivalent per tonne of cement produced (“tCO2e/t cement produced”) by 2030. To ensure that it stays on track towards achieving its interim targets, CIMB will be announcing client engagement and decarbonisation plans for the thermal coal mining and cement sectors within 12 months. The Group aims to introduce more sectoral targets and transition plans by 2024, including for power generation (including coal-fired power plants / generation companies), transport, iron and steel, real estate, oil and gas and agriculture.
Dato’ Abdul Rahman Ahmad, Group Chief Executive Officer of CIMB Group said, “CIMB was the first ASEAN bank to join the Net-Zero Banking Alliance (“NZBA”), and we are pleased to be making decisive moves towards achieving our Net Zero commitment with tangible action through the establishment of our Scope 3 financed emissions baseline, as well as first round of 2030 sector-specific climate targets. Across the Group, we seek to align our operations, financing and investment portfolios in line with the Paris Agreement’s step-up ambition of limiting the global temperature increase to 1.5°C to avoid the worst impacts of climate change.”
“We are fully aware that we can only deliver on our sectoral climate targets with the commitment and support of our clients, and look forward to engaging them as we work together to achieve a Net Zero economy. With sustainability being a key priority for CIMB under our Forward23+ strategic plan, we will continue to actively catalyse and drive the adoption of environmentally and socially responsible practices across ASEAN,” Dato’ Abdul Rahman added
Scope 1 and 2 emissions are direct and indirect GHG emissions respectively that are produced by the organisation itself, from sources that are controlled or owned by it as well as emissions associated with the purchase of electricity, steam, heat or cooling. As an economic incentive for business units and operating entities across the Group’s markets to reduce their emissions, CIMB has also announced details of its internal carbon pricing, where divisions will be charged a penalty for every tonne of Scope 1 and 2 carbon emitted in excess of their divisional target. The internal carbon price has been set at RM70 per tonne for 2023, and is expected to be ramped up to RM275 to RM335 per tonne by 2030. Proceeds are intended to be reinvested into green capital expenditure to reduce Scope 1 and 2 emissions.
Scope 3 financed emissions, which would comprise the majority of GHG emissions of financial institutions, include emissions arising from the financing of clients and investments, such as the Scope 1 and 2 or 3 emissions of its clients. To estimate the financed emissions, CIMB used the PCAF methodology, the recommended calculation methodology for financed emissions under the Task Force on Climate-Related Financial Disclosures (“TCFD”), which provides a harmonised approach for financial institutions to assess and disclose GHG emissions associated with six asset classes: Listed Equities & Corporate Bonds, Business Loans & Unlisted Equities, Project Finance, Commercial Real Estate, Mortgages and Motor Vehicle Loans.
Four asset classes, i.e. Business Loans, Commercial Real Estate, Mortgages and Motor Vehicle Loans were covered in CIMB’s preliminary baselining of financed emissions. In terms of sector coverage, CIMB included agriculture, aluminium, cement, coal, commercial and residential real estate, iron and steel, oil and gas, power generation, and transport, into its financed emissions baselining per the CCCA’s guidelines.
The sectoral climate targets will further support the Group’s existing Group Sustainable Financing Policy (“GSFP” or “the Policy”) applicable to non-individual financing and capital raising clients. The Policy is complemented by sector guides for high sustainability risk sectors, including the Palm Oil, Forestry, Construction and Infrastructure, Oil and Gas, Coal, Mining and Quarrying, and Manufacturing sectors. CIMB’s sector policies, alongside its recently approved human rights policy, have recently been published on its website for better transparency.
Over the past few years, CIMB has been an active proponent of the environmental, social and governance (“ESG”) agenda. Most recently, the Group announced at its CIMB The Cooler Sustainability Summit 2022 that it has doubled its sustainable finance target to RM60 billion by 2024 under its Green, Social, Sustainable Impact Products & Services (“GSSIPS”) Framework, from its RM30 billion target previously announced in 2021. CIMB is a founding member of the UNEP FI Principles for Responsible Banking (“PRB”), a member of the CCCA and NZBA, a supporter of PCAF and the TCFD, and the first emerging market bank to commit to phasing out coal by 2040.