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Lindsey Hall: I'm Lindsey Hall, Head of thought leadership at S&P Global Sustainable1.

Esther Whieldon: And I’m Esther Whieldon, a senior writer on the Sustainable1 thought leadership team. 

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy. 

Last week on this podcast we brought you coverage of the May 10 sustainability summit that S&P Global Sustainable1 hosted in Paris. And in today's episode, we're taking you to the other side of the world for the sustainability summit Sustainable1 hosted on May 16 in Singapore. 

Esther Whieldon: Many of our colleagues were on the ground in Singapore, along with conference speakers from financial institutions, energy the real estate sectors and standard-setting bodies. Today we’ll be talking to two key speakers from the event to get a sense of key themes that emerged at the event. 

Lindsey Hall: Thanks Esther, so tell us, who did you talk to, and what did you learn?  

Esther Whieldon: I heard about some of the distinct challenges Asia is facing on the path to net zero, including when it comes to transitioning away from coal-fired power plants. To understand how banks in Asia are tackling the transition, I spoke with Helge Muenkel. He is the Group Chief Sustainability Officer at DBS Bank. DBS is a Singaporean multinational banking and financial services corporation that operates in 19 markets. I interviewed him virtually ahead of the summit.  

But first up, we’ll hear from Esther An, who is Chief Sustainability Officer at City Developments Limited. CDL is a global real estate company headquartered in Singapore that has 143 locations in 28 countries & regions. CDL is both a residential and commercial developer but also operates commercial spaces  

I spoke with Esther shortly after the Singapore summit, and she said she heard two major themes throughout the event. Here she is. 

Esther An: Nature has been really suffering a lot of damages because of humanity and we overuse resources and also generate too much damage to the environment. We only have one earth so we need to be in harmony with nature. And just now I quoted one of the pillars for our Singapore green plan. That is a city in nature. What we need to do is not just to protect it -- we have to minimize tapping on to natural resources, looking at circular economy solutions, not just take and destroy but looking at how can we generate and circulate back the resources back into nature? 

And what we have been looking at is also into R&D turning plus waste into some aggregate. We have been working with some material scientists on this recyclable type of cement material that also helped to reduce plastic waste. And this R&D project is really very exciting, and we hope that when it is successful, we can scale it up and hopefully, the industry can adopt stronger circular economy solutions to help to conserve nature, conserve resources and in the end of the day, conserve the community and everybody.

Esther Whieldon: So you say one theme you heard at the forum was about nature. What were some other things you heard from panelists or in discussions with people at the event?

Esther An: On my panel, especially, we have the investors. We have also other sectors. And I think what sustainability and also the net zero goal is, we bring people together. We really share the common goal now. 

Whether you are in global North or South we all have to share the goal that we have to decarbonize towards the net zero future. And -- but unfortunately, actions has not been fast enough and we can still see global warming is not really under control. So these are actually common problems that’s shared by different parts of the world and different sectors.

The window of action is really narrowing if we don't take action, we are really heading to more than 2 degrees, and that will cause a lot of destructive consequences to the world and humanity. So I think we need to look deep and hard into how to conserve nature, how to conserve resources and also give back to nature and then we can probably have a more sustainable future for the future generation.

Esther Whieldon: We'll hear more later in this episode about how CDL is using nature to help reduce the energy needs of residential properties in Singapore. But first, I want to build on another point we heard from Esther An. That is how decarbonizing is a global goal that requires everyone working together. I heard a similar point from Helge of DBS Bank.

Lindsey Hall: You know, that came up in Paris too Esther. At that event, our keynote speaker, Emmanuelle Assouan from Banque de France talked about how central banks can't achieve net zero alone. It requires coordinated effort.

Esther Whieldon: Yes, that's right. And before we turn to my conversation with Helge, Lindsay, let me note for listeners real quick, that my voice may sound a little different in my interview with Helge. That's because he's told I was ahead of me in Singapore, which meant that I had to talk with him at 6 am here in Maryland. Okay. Here's my very with Helge, where he started by outlining DBS' sustainability commitments and strategies.

Helge Muenkel: At DBS, we have developed a fairly comprehensive approach to sustainability and principally center this around 3 pillars. 

Pillar 1, we call Responsible Banking. That is really all about how we empower our clients to be more sustainable. The most material part within that pillar is our commitment to bringing our financed emissions down to net 0 by 2050, and I can talk a little bit more about this in a little while, but it also covers other areas like financial inclusion, so banking beyond the bank. We have great products in India, Indonesia or here in Singapore, where we really try to support people that are not easily able to actually access the normal financial system. 

Then Pillar 2 is what we call responsible business practices, that's more inward looking. So how do we conduct ourselves as an organization that cuts across things like diversity, equity and inclusion, transparency and fair dealing and many other things. On the environmental side, we accomplished carbon neutrality in our own operations. So the carbon emissions we emit by sitting in nicely cooled offices or flying around from time to time, and we brought this down to carbon neutrality last year. 

And then we have Pillar 3, which is impact beyond banking, which is really something where especially our DBS Foundation takes a lead and supports, for example, social entrepreneurship. So think of businesses with a triple bottom line or community causes like financial literality digital literacy and so on and so forth.

Esther Whieldon: So obviously, getting to net zero in your portfolio, that's Scope 3 emissions, right, finance emissions. Are there any differences in timelines in terms of what you expect from the different sectors in your portfolio?

Helge Muenkel: Our North Star really is that our lending and financing activities will be aligned with net zero by 2050. And -- so that's really a very, very important north star. Now as you alluded to in your question, maybe every sector is different. So we set decarbonization targets for oil and gas for power, for automotive, shipping, aviation, commercial real estate, steel. 

And obviously, all of these sectors are distinctly different. For example, in terms of the technologies that are available today for decarbonization, but also many, many other considerations. So the strategies to decarbonize those sectors in collaboration with our clients will necessarily be very different. 

But ultimately, the overarching goal of our portfolio in totality will be to be net zero by 2050. Now for example, in aviation, there is not yet really a very clear path to how we would accomplish net zero by 2050. So naturally, the target will be very different. 

In power, for example, we know fair well how to do this. So you're quite right that the strategies will be very different depending on the sector. So ultimately, we're going to phase out coal and we have publicly disclosed the policies that will get us there. 

So ultimately, we acknowledge that in the natural world, we don't really want coal anymore for power generation. We are sitting on a portfolio which is not very large. We actually just published some numbers. So in totality, we had an exposure of SGD 2.2 billion by the end of 2022, which compares to SGD 2.7 billion the year prior. So it is not a huge portfolio, and we are bringing it nicely down, and the rules we have put in place will mean that we're going to phase it out. 

Now we actually go even further. -- we're not just passively sitting here trying to manage a portfolio down, but we are actually very actively involved in something which probably is a major contribution of Asia as a whole to decarbonization. And that is the topic around the acceleration of coal phaseout. 

So we are already now sitting on a live mandate in Indonesia where we got a mandate as a financial adviser from the Indonesian Southern Wealth Fund, where the idea is to come up with a financing structure that allows to shut down coal plants before the end of their operating life. And this will have a very, very significantly positive impact on climate. 

And not only do we sit on this life mandate, we are very actively involved in larger industry groups as well as with regulators to come up with templates on how to do this credibly because it's a very complicated process. You need to do this credibly and also take into account the implications on the “S” the phaseout of coal might have, for example, access and affordability of energy for the communities and so on and so forth. 

So we are not only very committed to phasing it out. Quite the opposite. We're actually a very proactive player in accelerating the phaseout of coal and maybe some high-level numbers, we have 5,500 coal power plants in Asia Pacific thereabouts. So there's a lot of work to be done, and we're quite committed to supporting this acceleration of phaseout.

Esther Whieldon: My understanding is some countries are still definitely planning on building more coal plants, particularly in Asian countries. So how do you balance that with your goal of phasing out and the mandates like you got from Indonesia?

Helge Muenkel: Well, we have coal policies in place that very clearly stipulate what we can and cannot do anymore. Now if we were to finance coal, and we're always talking about coal in the context of generating power, not the coal in the context of producing steel, just to be very clear. because steel production is something very, very different. But if we were to finance the acceleration of a coal power plant, then from a carbon budget, we would make the world a better place.

So that would expressly be carved out, out of the policies that will make sure that generally, we're going to phase out our coal exposure. But if we were to come up with a structure that is credible and that obviously needs to be agreed upon in a wider ecosystem, not just with us, to accelerate the phaseout of coal, well, then you pre-materially reduce the carbon emissions that we could put into the atmosphere, if we were not to do this. 

Now on the other point, yes, you're quite right. There are still some countries that are actually adding coal capacity. We will not finance that. So again, if we were to put new money on the table today, the sole purpose would be to accelerate the phase out. So it's exactly the opposite of financing new coal power capacity. Now in countries where coal capacity is still added, you need to understand the context, right? These are very often, for example, developing nations that actually still struggle to have energy supply for all the needs in the respective countries. I think it's the responsibility of a wider ecosystem and that also includes rich countries to support these countries in the energy transition.

Esther Whieldon: We've talked a little bit about sort of how you're thinking about financing or helping with the transition for coal. But what other products is DBS creating or using to help the low carbon transition?

Helge Muenkel: I think the most important focus area for us right now is really what we call transition finance. There is no globally agreed upon definition of what a credible transition is, a credible transition plan is, and so on and so forth. 

So the world has moved on fairly quickly to define what is green, and we all more or less agree on this, and we just move forward and do it. But transition, is still, are really fairly, fairly complicated. So how do we deal with steel mill? How do we deal with a producer of cement? We still need steel, and we still need cement, but we need to become much, much better at producing it by emitting less and less carbon. So this is really a huge focus for us. 

And then you create, of course, financial instruments out of it, but it all starts strategizing with the clients, coming up with a plan and then you might have financial instruments like transition loans, transition bonds and so on, but the concept is really very, very different from financing green stuff. 

So this transition is really, I think, the trillion-dollar question how to really move those force fast forward. We have done really some interesting transactions already, for example, in the automotive sector on the power sector, where we've really helped clients to start to transition, and that's going to be the hard and sweaty part where we really want to help our clients.

Esther Whieldon: To what extent are sort of the mandates or policies of the countries in which you operate, sort of driving change or maybe even creating challenges for you in terms of your ambition?

Helge Muenkel: Yes, Asia is indeed a fairly heterogeneous economic zone, right? So many countries -- almost all the countries we operate in are very distinctly … different. So we need to, of course, take the sense of consideration. So very specifically, India wants to be net zero by 2070, China by 2060, Indonesia by 2016 and then various other countries by 2050. And of course, the economic conditions are very different, but also, for example, the renewable energy capacity of various countries is very different.

I sit in Singapore here. So even in the best case, if we do everything super, super well, we will likely not be able to generate more than 10% likely actually quite a bit less of our power needs with solar simply because we're land constrained. 

So every country is really very, very different from a socioeconomic backdrop from the capacity to deploy renewable energy and so on and so forth. So ultimately, every country will be a little bit different. But I would argue nothing is static. If I again look at the country, Isetan Singapore, not that long ago, the government said, we want to be net zero sometime in the second half of the century. Then they sharpened pencils and said, we want to be net zero by or around 2050 and then they became a bit more ambitious again, and now Singapore aims to be net zero by 2050, which is insanely complicated in this country because we are so land constrained. 

So I think Singapore is doing going actually a beautiful job in being very ambitious. So what I'm trying to say is also for other countries, it doesn't have to be static. So we, as the bank, can't do this all by ourselves. We really see ourselves as part of an ecosystem. And the ecosystem comprises governments and regulators, the real economy as well as financial players like ourselves, all of us embedded in the community at large. And we need to come together. We can't do this. As a bank, we can't single-handedly transition an entire country. We can be a proactive advocate and that's what we want to be as exemplified, for example, also by our thought leadership on climate, but we need the others to come in as well.

Esther Whieldon: Lindsey, I'd like to highlight a few points Helge made that really stood out to me. One is something I hadn't heard before, really, which is how transition finance is more tricky than financing green investments. Helge said, though, world is getting better at defining what counts is green, but there is no globally agreed to definition of what counts as a credible transition. The second thing he said is how the pace of decarbonization will vary by country, yet nothing is static, meaning countries are likely to up their decarbonization ambition over time.

Lindsey Hall: Yes. And that third point he made is help banks can't do it alone, how DBS' efforts need to be part of a broader ecosystem globally of pushing for a transition.

Esther Whieldon: Yes. And that means that all sectors need to be included. Another area where emissions reductions will be needed is in real estate. 

Here's Esther An again, explaining why decarbonizing buildings and cities is important. But before we hear from her, let's define a few terms we’re going to hear. 

The TCFD is the Task force on Climate-related Financial Disclosures and that's a voluntary framework for companies to assess and disclose our climate risks and opportunities. And COP refers to the UN's big annual climate conference held every winter. Every year, this meeting gets a new number that increases over time. So this coming COP gathering is COP28 while COP26, which she mentions, happened in Glasgow in 2021. And the last term you'll hear is SBTi. This refers to the Science-Based Targets initiative as a group that validates company's science-based targets and plans. Okay, here's Esther An.

Esther An: Cities account for 70% of global greenhouse gas emission and within which 40% actually contributed by construction, building management, operations and billing activities. So we know that in the building sector, we can make a difference. So that's how we started more than 2 decades ago, we started using establishing an ethos we call it conserving as we construct. And of course, today, we are not just like conserving as we construct, we're also conserving the environment, the people, the community around us when we manage our property and also as the corporate citizens. 

We actually have the so-called future value 2030 sustainability blueprint, which is a document that we lay out very clearly our s6ustainable development goals. The first goal is actually building sustainable cities and communities. We believe in building a green and sustainable infrastructure. But I think most important that it is also communities. And then the goal number two is to reduce environmental impact in the way we design, we build, we procure our building materials and also operate our buildings. The third goal is about ensuring their safe and inclusive workplace and also for our internal and external stakeholders and direct and indirect hire of our construction sites as well.

Esther Whieldon: And do you have any specific like emissions or other types of reduction goals set up within that blueprint? 

Esther An: Definitely. I think now, of course, the whole world is looking at race to zero. And for CDL, we have a long history of green buildings and sustainable best practices. And in 2021, based on all our past decades of experience and commitment to sustainability and green building, we became the first in Southeast Asia to pledge to the World Green Building Council's Net zero, carbon building whole life cycle commitment, and we actually pledged its support during COP26 at Glasgow That means we have to look at not just the construction stage, but we look at the whole life cycle. And before 2021, as far back as 2018, we have already secured the SBTI validated reduction target for our carbon footprint. And at that time, was aligned with 2 degree warmer scenario. And in 2021, we have actually raised the bar and revised our carbon reduction targets to align with 1.5 degrees and by 2050, align towards net zero 2050. By adopting the well Grevener carbon building commitment, we have actually established 2 phases. The first phase is by 2030, all of our new developments and our 12 Singapore assets under direct ownership and operations will achieve operational net zero. And by 2050, our global portfolio will be achieving net zero as our target.

Esther Whieldon: So that's a pretty big goal. How do you achieve operational net zero? What does that entail?

Esther An: For us, we have actually the ESG strategy that established founded on 4 “I” pillars. The first “I” is actually integration. ESG will not work if it did work in silos. So we have to integrate it into the whole corporate structure and the whole leadership from the Board of Directors to the top management to meet management and operational level and in headquarters as well as our subsidiary as well. 

And then the second “I” is about innovation. And what we are looking at is actually today, there are a lot of technologies and solutions that can help green the build environment. But we need to look at how we can tap on to solutions and technology, how we design and build with decarbonization as the target. Risk adaptation is the key, not just mitigation. 

And the third “I” is about investment. All these technologies are available, but they don't come ship or come free. So we need to put money where your mouth is and invest in such technologies that will help us decarbonize our developments and also operations. 

And the last “I” is about impact. Everything we do, there is an impact, positive or negative. We have to look at it carefully, and we have to plug the gap, set targets and look at how we can manage better, whatever you can measure, then you can actually manage. 

But when we talk about new development, it is the biggest challenge because from the day you acquired a plot of land and how do you design the property, how do you orientate the building and all? How do you use digital solutions to help us orientate and also simulate the impact of like cross ventilations and all, it really helps, especially in Singapore, we are next the equator. It’s hot every year and every day, in fact. So how do we maximize win and also minimize the sun, the sheet into the indoor environment is very important. And there are actually solutions and technologies that can help us do that. 

When you talk about decarbonization, we are not just looking at generating renewable energy on-site. Energy efficiency is very important. In fact, Singapore is very renewable energy challenged in a way because of our land scarcity. So we are looking at really how we can improve energy efficiency. That is very, very important. And, in fact, something that we can look to is actually nature that can provide solutions for us to cool the environment. And in fact in 2014, we built -- completed the development of condominium core tree-house condominium. And actually, we set a world record for a vertical green gate, vertical garden, which is actually a green wall, 24-story high, and it actually helped to shield the 48 units against the heat that’s generated by afternoon sun. In fact, after 1 year's survey, it has actually proven that it can help to reduce temperature by 3 decrease C. And that will also help the residents to reduce reliance on just purely air conditions to cool the indoor space. So we look at technology, we look at design, we look at material as well as we look at green arrays to help us achieve a cooler and more comfortable indoor space as well.

Lindsey Hall: I was really struck by what we heard from both Ester and Helge of DBS about how Singapore has very little option when it comes to building new renewables because it has so little unused land. And also, we heard how the country and its businesses are finding new ways to address the transition and reduce our footprint.

Esther Whieldon: And given how much I love to garden Lindsay, that image that Esther gave us of that huge 24-story high vertical garden for the condominium unit has stayed in my head. And it reminded me of an interesting statistic I once heard about how having trees in the yard of a house can reduce your cooling costs. So I went and looked at the stat and found it. It was a 2019 study by the University of Wisconsin Madison and it found that tree cover can lower summer daytime temperatures by as much as 10 degrees Fahrenheit. So I can tell you on a day when temperatures cross above 100 degrees Fahrenheit, you can imagine how much having that 10 degrees of cooling can be a relief.

Lindsey Hall: Yes, absolutely. We also heard from Helge how defining a good low carbon transition is difficult, especially for hard-to-abate sectors such as aviation and steel.

Esther Whieldon: And speaking of Aviation, please stay tuned as next week, we're bringing you an episode focused on what the aviation industry is doing in its pursuit of net 0 emissions by 2050.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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