DBS’ update to transition finance framework has strategic value for the bank

[SINGAPORE] DBS has rolled out the first major update to its transition finance framework in three years, clarifying and enlarging the scope of activities and assets that fall under the framework.

With its sustainable finance portfolio expanding by 27 per cent to S$89 billion in 2024, DBS could be setting up a potential new growth engine from supporting the decarbonisation of high-emitting sectors. However, the complexities of transition finance could necessitate changes to the way that the bank reports its financed emissions.

In very simplistic terms, transition finance is funding that helps brown become more green, and it represents the next step in the evolution of sustainable finance.

From green to brown-to-green

A paper by the Net-Zero Banking Alliance (NZBA) and Oliver Wyman explains that evolution. In the early days of sustainable finance, banks began by simply setting targets for the amount of sustainable finance they would provide. But these targets were primarily focused on “green” finance, and they were not based on what was required for sustainable outcomes.