[SINGAPORE] The Singapore Exchange (SGX) has filed a complaint against OCBC alleging that the bank may not be complying with sustainability reporting requirements, particularly in relation to the bank’s lack of disclosure regarding its exposure to captive coal-fired power plants.

Environmental group Market Force said in a media statement on Tuesday (February 24) that OCBC has not provided investors with a complete information deck, including the true extent of its exposure to carbon-intensive companies that supply electricity with off-grid coal-fired power plants, known as captive coal-fired power plants.

The Australia-based organization added that the bank also did not disclose the material transition risks this exposure poses to the bank.

Market forces had previously warned OCBC, along with UOB and DBS, for funding a coal-fired nickel smelter and refinery run by Indonesia’s Harita Group. Harita Group builds and operates its own coal-fired power plants for its nickel operations.

All three banks in Singapore have pledged to stop financing new coal-fired power plants, but financing for nickel production does not fall under this mandate, even if the mining activity is based on coal.

Marketforce considers this a “loophole” as the funds could be used by the company to build additional captive power generation capacity.

business times has contacted SGX for comment.

In response to questions from BT, OCBC Group Chief Sustainability Officer Mike Ng said the bank remained committed to transparent sustainability and environmental disclosure in line with SGX regulations and international frameworks.

He added: “We operate under our Responsible Lending Framework and Policy, which outlines our approach and commitment to managing (environmental, social and governance) risks in our lending operations, to ensure that our financial services do not have a negative impact on people, communities or the environment.”

Suspected disclosure gap

In its complaint, Market Force said there was a “significant information gap” between OCBC’s publicized sustainability efforts and the details of its financing policies, particularly for customers who rely on privately generated coal.

“OCBC does not clearly disclose whether captive coal-fired power plants are included in the calculation of these thresholds or how such exposures are assessed for energy-intensive industrial customers,” the group said.

It added that this lack of clear disclosure amounted to a “material omission” and could result in investors not being provided with an accurate representation of the bank’s climate-related risks, a requirement under SGX Rulebooks 711A and 711B.

Asked why Market Force had not brought charges against SGX against DBS and UOB, which are also accused of lending to Harita Nickel, the group’s Asian energy finance activist Bingbing Mariana said the two banks had different policies, funding schedules and exceptions.

Ng said global demand for nickel, an essential component in the production of electric vehicle batteries, is expected to increase ninefold over the next 25 years, necessitating financing for nickel production.

Given that Indonesia has the world’s largest nickel reserves, the country’s nickel industry is essential to global decarbonization efforts, he added.

However, he said it was unrealistic to expect nickel production to be powered entirely by renewable energy. This is due to Indonesia’s unique geography.

“Grid connectivity is often beyond companies’ control. Renewable energy has its limits, given that hydropower and wind resources are location-dependent and not available everywhere, especially in remote areas of Indonesia. Solar energy is intermittent,” he said.

“We recognize that the transition path will not be short or fast. There will inevitably be trade-offs in the energy transition if reliable renewable energy does not exist to fully supply the electricity needed by nickel producers.”

strike the right balance

The SGX rulebook also requires banks to follow the recommendations of the International Sustainability Standards Board (ISSB) from financial year 2025, so the first ISSB-aligned sustainability report will only be published this year.

Under the new ISSB framework, lenders are required to disclose their absolute gross loan emissions by asset class for each industry. This typically falls under the bank’s Scope 3 emissions investment category. Scope 3 emissions refer to indirect emissions that arise from a company’s supply chain.

However, this does not mean that banks need to disclose all transactions with carbon-intensive companies. Even if the company operates a homegrown coal-fired power plant.

ISSB standards are essentially a materiality-based framework, meaning that climate-related disclosures must be “decision-useful” to investors.

This means climate-related risks and opportunities that are reasonably expected to impact a company’s performance and prospects must be disclosed, sustainable finance experts said.

OCBC’s previous sustainability report, which was not required to comply with ISSB standards, did not disclose the financial emissions resulting from the loan to Harita Nickel.

The bank reported emissions from loans in six sectors that have set decarbonization targets: power, oil and gas, real estate, shipping, steel and aviation. This is also the reporting framework adopted by DBS and UOB.

OCBC is aligning its future sustainability reports with ISSB reporting standards, but disclosure of climate-related information from the Harita Nickel deal is still not required.

However, the lender is obligated to include the loan-financed emissions from this transaction in the absolute aggregate loan-financed emissions of the entire loan portfolio.

If exposure to the mining or nickel sector is material to a bank, the bank will also need to disclose emissions from financing that sector.

OCBC did not respond to BT’s questions about the extent of its exposure to Harita Nickel and the emissions financed as a result. Banks typically do not comment on their transactions with customers.

Nevertheless, sustainability experts said that proportionately small exposures compared to a bank’s overall loan portfolio do not mean they are unimportant.

They noted that small exposures can become significant when concentrated in certain borrowers, such as those with high transition or reputational risks. Violating stated commitments, such as “coal-free” financing. If a definitional loophole is uncovered that could be applied more broadly. or may be particularly relevant to investors due to controversy or regulatory oversight.

“Banks therefore need to strike a balance between proportionality and transparency,” said Professor Johan Suleman, director of the Institute for Sustainable Green Finance at the National University of Singapore.

Singapore Management University finance professor Liang Hao said a step-by-step approach with detailed disclosures and targets for sectors with large exposures, portfolio-wide risk screening, and further explanations on specific exposures and policy interpretations would help achieve that balance.

Banks do not have to disclose all instances of carbon-intensive lending, but sustainable finance experts said there is certainly scope to expand disclosure.

Professor Liang said this is particularly true where potential exposures fall at the edge of existing policy definitions, such as coal exposures arising from captive generation of industrial customers rather than stand-alone power producers.

“The point is not necessarily to list all customers, but to ensure that investors understand policy boundaries, methodologies, and significant blind spots. The complaint appears to allege exactly those boundary issues,” he added.

Professor Suleman said disclosures need to accurately reflect where transition risks actually exist within a portfolio. “The focus should be on economic exposure to carbon risk, not just sector labels.”

Transition risks are not limited to the fossil fuel sector. While industrial loans that run on captive coal may not be classified as coal-exposed by banks, the transition risks may be similar, Professor Suleman said.

“Ultimately what matters is structural carbon dependence and sensitivity to global transition movements such as carbon border measures, buyer decarbonization standards and capital repricing,” he added. “If risks fall outside formal sector definitions, banks may need to reassess whether their supervisory frameworks fully capture their exposures.”