RHB to exit coal financing by 2022

The bank commits to a RM5b financing for green, clean energy projects by 2025 to further support its sustainable initiatives

by SHAHEERA AZNAM SHAH / Pic by BLOOMBERG

RHB Bank Bhd is planning to phase out financing new coal-red power plants to further commit to its clean and sustainability pledge, said its group MD Datuk Khairussaleh Ramli.

In efforts to align its capital lending activities with the bank’s sustainability framework, Khairussaleh said RHB will be focusing on green energy financing through its core business activities of lending, capital markets advisory and fundraising, together with investment.

“With effect from 2022, RHB will focus on clean and green energy, as well as green financing moving forward.

“The bank will also not pursue the opportunity of providing financing to any new coal-fired power plant projects or related activities,” he said during RHB’s virtual forum entitled “ESG Forum — Envisioning a Better Future” yesterday.

In light of the rising awareness of global environmental and sustainability efforts, Malaysian lenders have come under scrutiny for financing the coal sector.

A report by an Australian-based environmental activist group, Market Forces, stated that CIMB Group Holdings Bhd, Malayan Banking Bhd and RHB had collectively funded about RM20.6 billion between 2010 and 2019 to the coal sector through loans and bonds.

At the end of last year, CIMB said it will be excluding coal-related financing and investment from its portfolio by 2040, echoing the exodus of giant international banks from financing the non-sustainable industries amid the pressure from NGOs.

RHB also commits to a RM5 billion financing for green and clean energy projects by 2025 to further support its sustainable initiatives.

To date, Khairussaleh said RHB’s green financing commitments have increased to around RM3.25 billion, distributed through its core segments of capital lending, capital markets advisory and investment.

Out of the RM3.25 billion achieved, RHB’s green financing through lending, capital market advisory and investment activities stood at around 20%, 30% and 50% respectively, he added.

Khairussaleh said the lender plans to launch another two environmental, social and governance (ESG)-theme funds in addition to the three already announced by RHB Asset Management Sdn Bhd which have a combined sustainable and responsible investment asset under management of about RM760 million.

Commenting on the green initiatives and sustainable investment, Khairussaleh said ESG-centric funds have been growing steadily as investors begin to have appreciation and understanding of the critical need in addressing climate change and meeting the United Nations’ Sustainable Development Goals.

“2020 has been a year where ESG issues, sustainable finance and investments were given a lot of focus.

“We are now starting to see that ESG matters and is being further integrated into investment strategies, as well as in evaluation and decision-making processes.

“ESG investing is now becoming mainstream as investors realise that businesses that consider the impact of their policies and practices on all stakeholders are being rewarded,” he said.

He added that evidence suggests companies with strong ESG policies and practices are able to perform stronger than their peers in the long run and will have the ability to cope better with economic downturns.