Climate Risk & Strategy

Roadmap to 2030​

We have a robust roadmap to reduce our Scope 1 and 2 emissions to net zero by 2030. Our all-encompassing approach has resulted in a four-pronged strategy designed to address current and long-term operational GHG emissions in an effective, responsible, and resilient manner. Our future capex will align to the following levers:

Our high-level pathway to net zero 2030 is shown in the diagram below. However, this is a forward-looking projection and we anticipate changes in the future based on advancements in technology, policy changes by the government, or new energy schemes in the market.

Short-Term Initiatives (2022 - 2025)

Our focus in the shorter term is on initiatives that yield quick energy-saving returns. Such initiatives include switching to energy-efficient LED lighting, incorporating motion sensors and phasing out old and inefficient single split unit cooling systems. A combination of lighting and cooling upgrades, together with electric vehicle charging, is planned for a selected group of branches pioneering sustainability at CIMB.

Medium-Term Initiatives (2025 - 2027)

Medium-term initiatives require greater expenditure but will yield greater savings. These include automated central monitoring systems, chiller replacements or connections to district cooling systems, and renewable energy systems. While we prefer onsite renewable energy systems, there are limited opportunities within our premises due to the need for sufficiently large roof spaces. We have started with a solar system at some of our headquarters, with plans to install solar photovoltaic (PV) systems for selected head offices and branches across the region.

Additionally, we will purchase Renewable Energy Certificates (RECs) progressively for each country. RECs are market-based instruments representing the rights to renewable electricity generation's environmental benefits. They are issued when one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource. 

Long-Term Initiatives (Beyond 2027)

CIMB is exploring the purchase of green electricity via available market mechanisms such as the Virtual Power Purchase Agreement (VPPA). Such a mechanism enables organisations like ours to indirectly purchase renewable energy from renewable or solar power providers via the national energy grid on a long-term basis.

We envisage the purchase of high-quality carbon credits, tradable certificates or permits representing the right to emit a set amount of carbon dioxide to tackle our residual scope 1 GHG emissions. However, as the cost of carbon offsets is projected to increase in the coming years, these credits will only be purchased after all other options to reduce carbon emissions have been carried out.

Our GHG Accounting Approach

We calculate and report our greenhouse gas (GHG) emissions in accordance with the Greenhouse Gas Protocol, a widely recognized international standard. We utilize the operational control approach, which means we account for 100% of the emissions from operations over which we have control.

The approach and methodology we use to calculate our GHG emissions are categorized into the three main scopes defined by the Greenhouse Gas Protocol:

Scope 1: Direct emissions from sources that we control, including:

• Emissions from on-site fuel combustion for electricity generation
• Fuel use in mobile combustion sources such as company vehicles and mobile generators
• Fugitive emissions from refrigerants used in air-conditioners are located within our operations

Scope 2: Indirect emissions from purchased electricity, heat, or steam that we use. We report both location-based and market-based methods for Scope 2 emissions.

• Location-based: Reflects the average emissions intensity of the power grid from which we purchase electricity
• Market-based: Accounts for the specific electricity sources (e.g., renewables) we purchase through green energy mechanism

General Calculation Methodology

We gather energy, fuel and refrigerant consumption data from electricity bills, fuel invoices, and facility management records.

We utilize recognized standard emission factors to convert energy consumption into CO2-equivalent emissions. These factors are sourced from reputable organizations like the Intergovernmental Panel on Climate Change (IPCC) or relevant national authorities.

Depending on data availability and accuracy, we employ a combination of top-down and bottom-up approaches for data collection.

Transparency and Improvement

We are committed to transparency in our reporting and continually strive to improve the accuracy and completeness of our GHG emissions calculations. We will periodically review and update our methodology as needed to reflect best practices and evolving industry standards.

Due to inherent limitations in data collection and estimation methodologies, our GHG emissions calculations may include a degree of uncertainty. We have established a materiality threshold of 5% for our GHG emissions inventory. If any emission source is identified that exceeds this threshold and was not previously accounted for, we will restate our GHG emissions for the affected period. We are committed to ongoing improvement in data quality and will strive to reduce these uncertainties over time.

Internal Carbon Price

As an economic incentive for business units and operating entities across the Group’s markets to reduce their emissions, we set up an Internal Carbon Price (ICP) framework in 2021 where operating entities and business units will be charged a penalty for every tonne ofScope 1 or Scope 2 GHG emissions that is in excess of their divisional cap. The ICP was introduced at a country level in 2021. It has been rolled out at a divisional level in 2023.

The objectives of ICP include:

• To prepare for GHG regulations such as carbon taxes.
• To drive internal behavioural changes by putting an additional charge on carbon emissions.
• To include carbon costs into our own investments and upgrades, such that higher carbon investments would yield poorer returns.

Based on benchmarks and projections of prices of renewable energy certificates and carbon credits, as well as carbon taxes, the ICP has been set at RM70 per tonne for 2023. By 2030, we expect to ramp up ICP to between RM275 and RM355 per tonne. Proceeds will be reinvested into green capital expenditure to reduce Scope 1 and Scope 2 emissions or purchase RECs and carbon offsets as needed.

Scope 3 Operational Emissions

In addition to Scopes 1 and 2, we recognize the environmental impact extends beyond our direct operations. We take a comprehensive approach by calculating our Scope 3 emissions, which encompass the indirect emissions associated with our value chain. This includes:

• Category 1: Purchased Water Emissions - We account for the emissions associated with the extraction, treatment, and delivery of the water we use in our operations.
  
  
• Category 5: Waste Emissions - We consider the emissions generated throughout the lifecycle of the waste we produce, including disposal and potential recycling processes.
  
  
• Category 6: Business Travel - We estimate the emissions generated by employee air travel, car rentals, and other forms of business travel.
  
  
• Category 15: Financed Emissions - We assess the greenhouse gas emissions generated by the activities of the companies and projects we finance.
   

Category 15 is particularly important for banks like us as it allows us to understand the environmental impact of our lending and investment activities. As a Net Zero Banking Alliance (NZBA) member, we are dedicated to aligning our financing and investment portfolio with a 1.5-degree Celsius temperature rise limit by 2100. This requires reducing client emissions and achieving carbon neutrality in our portfolios. We’re actively developing strategies and making essential internal and client-focused changes in our climate change efforts. For more information on this, refer to our Climate Risk & Strategy section.

We are committed to continuously improving our understanding of our environmental impact. We will progressively include additional Scope 3 categories in the future to provide a more holistic view of our footprint and identify further opportunities for improvement across our entire business ecosystem.

Scope 3 Financed Emissions

As a financial institution, our largest emission type is our Scope 3 Category 15 (Investment) emissions, contributing more than 99% of our overall emissions. This category of emissions are attributed to the business activities of our clients that we finance and invest in, and their respective value chains.

In 2022, we disclosed our first portfolio financed emissions inventory covering our FY2021 on-balance sheet financing for clients across four key operational markets: Malaysia, Indonesia, Singapore and Thailand. The scope of our FY2021 financed emissions included nine carbon-intensive sectors (Agriculture, Aluminium, Cement, Coal, Iron & Steel, Oil & Gas, Real Estate, Transport, and Power) and four asset classes (Business Loans and Unlisted Equity, Commercial Real Estate, Mortgages, and Motor Vehicle Loans).

In 2023, we established our first baseline as of 31 December 2022 which included an updated calculation methodology and expanded our coverage to include an additional asset class, Listed Equities and Corporate Bonds and expansion of the Utilities Sector to include non-power generation segments. In estimating our financed emissions, we reference the Global GHG Accounting and Reporting Standard developed by the Partnership for Carbon Accounting Financials (PCAF Standard) and the UN Environment Programme Finance Initiative (UNEP FI) Guidelines for Climate Target Setting for Banks.

In November 2023, we published Version 1.0 of Our Path to Net Zero: Charting a Course to Decarbonisation whitepaper, outlining our approach and methodologies for setting 2030 Net Zero sector-specific targets and high-level transition strategies. This version focused on targets for four sectors: Thermal Coal Mining, Cement, Palm Oil, and Power. In July 2024, we released Version 2.0, which added targets for Oil and Gas and Real Estate, superseding Version 1.0. While our portfolio financed emissions provide an overview of emissions attributed to assets within our financing and investment portfolio, our sector-specific targets provide the reduction goals and 1.5°C aligned pathways for carbon-intensive segments based on historical emissions and future reduction potential.

CIMB's 2023 Financed Emissions

In 2023, our total attributed financed emissions (Scope 1 and 2) associated with our nine most carbon-intensive sectors amounted to 18,816,782 tCO₂e, a 2.6% increase from our 2022 emissions. 

Notes:

1. Our 2022 baseline was established based on the Group’s Financed Emissions Calculation Methodology. This was enhanced in 2023 to cover, among others, the following:

• Calculation and estimation approach for the newly added Listed Equity and Corporate Bonds asset class; 
• Inclusion/exclusion of selected sub-sectors and/or clients to be subjected to financed emissions assessment (i.e., in-scope exposures assessed for financed emissions);
• An updated list of PCAF emission factors as of March 2023;
• Revised assumptions including estimated local/regional statistical data on distance travelled for motor vehicle loans asset class and average floor area per building type for mortgage asset class, as well as the baseline recalculation criteria.

2. Financed emissions for FY2021 were not restated or recalculated per the enhanced Financed Emissions Calculation Methodology on the grounds that FY2022 serves as the base year for the Group’s financed emissions inventory, in line with the base year used in selected sector-specific climate targets of the Group, and that the recalculation of previous years’ performance requires a significant level of effort to complete. Any variations in terms of absolute emissions between FY2021-2022 are not solely an indication of the Group’s decarbonisation outcomes but rather attributable to methodological differences.

• The Agriculture sector emission intensity increased by 9.8% compared to 2022, due to the higher emissions from the growth of the upstream Palm and Poultry portfolio in Indonesia.
• The Cement sector emission intensity declined by 36.4% compared to 2022, mainly attributed to financing maturity of several high emission intensity clients.
• Though our Coal sector emission intensity increased by 6.2% compared to 2022, our overall exposure for the sector declined by 10%, in line with our target to exit Thermal Coal Mining by 2040.
• The Iron, Steel & Aluminium sector’s emission intensity decreased by 12.6%, which can be attributed to the shift of financing composition from upstream segments i.e., mining and extraction, towards the manufacturing and production activities.
• The Real Estate portfolio intensity increased by 14.5%, driven by a 35% increase in exposure to the Commercial Real Estate asset class, and the doubling of gross floor area.
   

For more detailed information, please refer to the following:

2023 Financed Emissions Supplementary Report for our financed emissions, scope, methodology and limitations.

Our Path to Net Zero: Charting a Course to Decarbonisation Whitepaper Version 2.0 for our sector-specific Net Zero targets.

Sustainability Report 2023 (Pg. 60-63) for our latest progress against sector targets.