When UOB voted in April 2025 to drop a key climate target to limit global warming to 1.5 degrees Celsius above pre-industrial levels, it did so to bring more banks into the decarbonisation fold, says Melissa Moi, head of sustainable business, UOB.
The vote, which followed a proposal issued by a bank-led decarbonisation initiative Net Zero Banking Alliance (NZBA), would see the Singapore lender – a member of the NZBA – support a new goal to ensure that portfolios keep warming “well below 2 degrees Celsius.”
While the vote may appear complicit, it should be viewed as a way to include more local and regional banks – ones that may have otherwise completely shied away from decarbonising their portfolio due to previously more “prescriptive” rules, adds Moi.
“This opening of the door is an evolution aimed at bringing more players into the fold. Four years ago, we needed something like this to get people committed and focused, and to grow the foundational body of knowledge. We have since evolved,” Moi said, referring to when the bank committed to the 1.5 degree Celsius target in its 2021 sustainability report.
“We understand our pragmatic situation and the other challenges that come into play. We want to bring more banks into incorporating this approach into their operations. They can still make commitments and set targets while also appreciating the nuances of different market operators,” she added.
The recent decision to adjust climate targets will also help the lender continue the conversation with other banks in the Asean region, which Moi says has yet to see a “clear decoupling between energy emissions and economic growth” but appears “committed” to decarbonisation plans.
Regional developments, such as those in China, will be one to watch in the coming years as the country ramps up renewable energy capacity to reduce reliance on fossil fuels. Despite China being the planet’s largest carbon emitter and pumping out roughly 15 billion tonnes of carbon dioxide in 2024 alone, the country reported a 1.6 per cent drop in emissions for the first quarter of 2025.
In this interview, she tells Eco-Business why regulation and coordinated efforts will guide the region’s decarbonisation; how the bank intends to finance small- and medium-sized enterprises (SMEs) with a new framework; and the challenges that the lender carefully navigates when faced with high-emitting sectors.
You have been vocal about the unique challenges that Southeast Asia faces, with its economic growth still not decoupled from its dependency on energy. Do you see the region’s transition becoming more challenging against the current geopolitical backdrop?
First and foremost, it’s difficult to predict anything now, at least anything related to economic sustainability. The uncertainty is rife and [there are] changes day to day.
We haven’t seen a clear decoupling between energy emissions and economic growth. That remains a challenge that needs to be addressed within the Asean region. However, we are still hearing that countries remain committed to their decarbonisation plans. Malaysia has set strong targets, Thailand has introduced new targets, and Singapore has doubled down on its commitment to decarbonisation. They have not wavered on their energy transition commitments.
What we are starting to see, though, is a shift towards a broader narrative that increasingly includes energy security. There is more of a link now between renewable energy installation – or lower-emissions energy – and energy security discussions.
For example, UOB has been trying to understand the broader energy landscape in Asean. Fossil fuels remain the base of energy supply, with heavy dependence on coal and natural gas. Although renewables installation is growing exponentially, most Asean countries are net importers of coal and natural gas, except Indonesia, which has strong coal reserves. At the start of the Ukraine-Russia war, the prices of these commodities fluctuated significantly and became very expensive. This led to the need for subsidies to keep energy affordable. Energy independence and security have become even more important amid geopolitical instability.
We are also seeing a stronger case for renewables. We have been looking at the shift in energy mix in China for some time and China clearly still relies on coal for its base load energy, but it has stacked that with renewables, with coal serving as a backup only for peak demand. It has expanded its renewables share by developing its own solar photovoltaic (PV) generation capability. It has moved away from dependency on natural gas because it has very few national reserves. And its most important consideration is energy security and access, which are needed to fuel its economic development and its manufacturing sector. This broader conversation on energy security ties in well with renewables.
I think we will continue to see this oversupply from China, and this hopefully would support the growth of renewables installations in the region, despite the tariffs. There are uncertainties and things can still shift, but the bottom line is that decoupling hasn’t happened yet. We are seeing good growth in renewables, and hopefully, that continues.
You have also shared your insights on how Southeast Asia’s energy transition is lacking both in finance and policy. What do private financiers need from regulators to help clients in real economy decarbonisation? What are the challenges?
This is an ongoing conversation and something we need to continuously consider. We need to shift away from the idea that banks can or should be solely responsible for everything. Clearly, we are a major player and enabler in the ecosystem; we engage with clients and customers, providing necessary capital flows for investment.
However, we also need an entire ecosystem approach, specifically thinking about things from a sector-by-sector perspective. When we think about decarbonisation, we also need to consider what enabling technologies, research and development, and infrastructure investments are needed for each sector. This includes government infrastructure, incentives, and requirements, and ensuring we package support with clear targets, goals, and guardrails for the different economic sectors.
For example, Singapore’s built environment utilises the Building and Construction Authority (BCA) and its Green Mark certifications (Gold, Platinum, etc.). These certifications and their requirements within the building sector demonstrate how regulations requiring specific building types and efficiencies can drive the entire value chain. If you have a compliant end-product, everything must respond to those regulations, which breeds innovation, supports infrastructure development, and moves the entire industry forward.
The challenge is that we don’t always see “green” incentives from consumers and other buyers, so economics often dictate decision-making. Until we have broader policies like carbon taxes with overarching economic impacts, we need a sector-specific view to meet nationally determined contributions (NDCs), decarbonisation targets, and address known challenges. This involves understanding existing technologies and their potential impact, as well as collaborating to provide clear roadmaps for sector-specific companies, industries, value chains, and smaller companies that may not have the same ecosystem support to drive change.
We often say three major levers drive a company’s sustainability decisions: regulation, investor pressure, and “queen bee” influence. Without one of these levers significantly in play, it’s difficult to justify the “how” and “why” of sustainability investments.
Do you believe that regulation needs to be the main push?
I think [there] needs to be a coordinated push right now. It can’t rely solely on regulators coming in and dictating actions. You do see some movement, for example, among large Fortune 500 companies and multinational corporations (MNCs) with sustainability commitments for various reasons. Some truly understand the need to operate sustainably and focus on sustainable development.
What regulation does, in particular, is act as a catalyst that drives progress. Early adopters will lead the way, but to move the entire herd forward, regulations provide the necessary guidance and framework. This accelerates adoption much faster than if we let it happen organically.
UOB recently told Singapore media that it will be accepting a proposal by the NZBA to drop a key climate target that limits global warming to 1.5 degrees Celsius above pre-industrial levels, and align its portfolios to a broader commitment to keep global warming to “well below 2 degrees Celsius.” Can you elaborate on what this might mean for the decarbonisation pathways for financiers and businesses in Asia?
Yes, but let’s first clarify what that vote was for. The NZBA is a banking alliance with members committed to setting decarbonisation targets for their Scope 3 financed emissions, as well as their Scope 1 and 2 emissions. The vote was about shifting the NZBA’s approach – moving from being prescriptive to focusing on supporting banks through best practices and advocacy, and helping them set goals and collaborate with clients on decarbonisation. The vote wasn’t about letting banks reset existing targets.
What we observed as members was that prescriptive guidance, while well-intentioned, was deterring some financial institutions from committing, particularly those without strong regulatory pressure. The new approach also provides flexibility for US-based institutions navigating litigious environments.
The vote received over 90 per cent support. From our bank’s perspective, we remain committed to our 1.5°C-aligned targets. Because when we set those targets, we prioritised pragmatism: using regional benchmarks reflecting realities in Indonesia, Malaysia, Thailand, Vietnam, and Singapore. This means continuing client conversations and supporting their decarbonisation journeys.
The shift reflects an evolution from the more “ideological” commitments made in 2021 to today’s pragmatic reset. We are now focused on transparent attribution for target outcomes, avoiding reputational risks from financial decarbonisation shortcuts, and deepening client engagement. This includes educating clients about physical and transition risks and using portfolio analysis to guide tailored support.
So the goal – the North Star – is always to support decarbonisation, recognising the importance of net zero. This “shift” in net zero banking [could] hopefully open the door for more local banks to enter the fray. It helps them understand, conceptually, the nitty-gritty of how to think about target-setting, how to transform their organisations, how to grasp the context of net zero, how to evaluate their portfolios, and how to start managing credit risk related to climate challenges.
On that last point about bringing more local and regional banks into the fold: Do you think widening the target to 2 degrees Celsius would make it easier for them? Would it lower the barriers to entry and encourage broader participation?
Well, I think it makes the conversation a little easier. One challenge is that if you are operating in a country where your NDC isn’t aligned with 1.5°C, it’s very difficult to justify the front-running of your government and asking your clients to do the same. It’s a pragmatic stance.
The expectation is that as things evolve, countries will update their NDCs. But as NDCs evolve and targets are set, you will see necessary convergence. What this does now, though, is remove the black-and-white “no” line, because that’s simply impossible to achieve. Instead, it leads to wider dialogue.
UOB issued its 2024 Sustainability Report on 21 March 2025, making it the first Singapore bank to align its report with the Taskforce on Nature-related Financial Disclosures (TNFD). With market sentiment surrounding ESG having somewhat changed in the last six months, can you comment on the significance of UOB’s latest TNFD-aligned sustainability report in light of shifting dynamics?
I’d rather not focus on the dynamics, because there are always shifting priorities and dynamics regardless. For us, the focus is really on nature and biodiversity. Number one, you have the TNFD, which we have signed on to as an early adopter. In our work, it’s still very nascent, and I think that’s the key point.
Many people were concerned that, when looking at nature and biodiversity, we might automatically jump to the same kind of target-setting commitments we saw with net zero. We want to take the best learnings from our net zero or decarbonisation journey and use those to ensure our work in the nature space doesn’t repeat past mistakes, but instead, builds on those lessons.
Firstly, the view is that nature and biodiversity are areas we as financial institutions and as economies need to better understand – specifically, what the dependencies and impacts are. We set out a body of work for our capacity-building, aiming to understand how we need to think about nature materially for our portfolios and clients. As part of our work, we examined our portfolio to dive deep and understand, from an impact and dependency perspective, what is most material and where, and to consider what comes next.
A few key learnings came out of this exercise. First, we realised that we needed to think about nature and biodiversity differently. When you talk to the average person or business owner, the conversation often goes straight to polar bears, bees, pangolins, and forests. While important, this doesn’t always resonate with business owners at the end of the day.
We needed to start thinking about nature as an essential component of economic value chains – key inputs that haven’t always been properly valued. Our relationship with nature has always been extractive, so these considerations haven’t been front and centre.
When you start viewing nature as part of an economic value chain and consider the dependencies these chains have on nature as a key input, it becomes helpful to break it down into components. Talking about metrics like species, biodiversity, mean species counts, and microbes can get overwhelming and abstract. But if you focus on tangible elements like water, air quality, land use change, and circular economy, it becomes more pragmatic and relatable. From an impact perspective, you can then discuss pollution or heat, making the conversation with clients more concrete by linking it to their economic value chains.
For example, data centres are huge electricity consumers and require constant energy availability, but they also have significant water dependencies. As data centre growth accelerates in places like Malaysia and Thailand, we need to consider the impact on water sources.
For instance, some locations are requiring new data centres to have private water sources rather than drawing from municipal supplies. Thinking about nature in this way makes the impacts on operations, costs, and infrastructure much more tangible than abstract biodiversity discussions. By addressing issues like land use change, water preservation, and pollution, we also tackle broader questions about species conservation and biodiversity.
UOB announced in April that it is also providing small and medium-sized enterprises with easier access to financing through enhanced sustainable financing frameworks. Considering the important role that SMEs play, what sort of impact does UOB hope this will have on SMEs in sectoral value chains, especially those in hard-to-abate sectors?
SMEs are an essential part of the decarbonisation story, but their journey is often more challenging compared to large MNCs that have dedicated sustainability professionals. SMEs often have individuals wearing 20 different hats at once, and they can’t always focus on the narrative, strategy, and structures around sustainability.
At UOB, we have a large SME client base, and part of our goal is to simplify the complexities around developing a sustainability strategy. This includes how SMEs think about certifications, labelling something as green, and protecting themselves against greenwashing. We also help them meet the requirements of their “queen bee” clients and upcoming regulatory demands through an integrated approach.
For example, we launched the SAGE programme last year, which focuses on enabling SME clients by defraying some costs in partnership with Enterprise Singapore. This helps SMEs set up sustainability strategies, obtain International Organisation for Standardisation (ISO) certifications, get their CDP ratings, show improvements, and even engage consultancies to help in their sustainability agenda. We then provide sustainability-linked financing to support these efforts.
This packaged programme allows SMEs to pragmatically progress through sustainability initiatives, access green financing, and be rewarded for improvements without having to spend large sums on consultants or develop strategies entirely on their own. It’s about understanding where SMEs have limited resources and time, what they can outsource effectively, and how we can backstop that with financing.
Our enhanced sustainable financing frameworks are designed to help SMEs so they do not have to develop their own. Developing a sustainable finance framework is resource-intensive and costly, and many SMEs would opt for a simpler, “plain vanilla” approach if given the choice. So, we aligned our frameworks with the Singapore-Asia Taxonomy [for Sustainable Finance] wherever possible, providing clarity and standards already set by Singapore. Where there is flexibility, we set parameters that allow clients to access green financing and use proceeds simply and effectively.
The SME sector and its entire value chain represent significant Scope 3 emissions for many companies. As regulatory pressure increases – especially from measures like the European Union’s Carbon Border Adjustment Mechanism (CBAM) and its anti-deforestation requirements, carbon taxes, as well as demands from “queen bee” clients reporting on Scope 3 emissions – this framework allows SMEs to think about green financing as part of their sustainability journey in a simplified, high-quality manner. They can align with standards without needing to build entire sustainability teams or hire large consulting firms.
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If you completely pull yourself out of financing a particular sector, you lose the opportunity to shape and influence those conversations.
Melissa Moi, head of sustainable business, UOB
What is UOB’s philosophy behind deciding when to finance “brown”? What are some of the risks and challenges involved for bankers and financiers when evaluating whether a client’s decarbonisation or transition plan is sufficiently ambitious and if it is making tangible progress?
It’s not an easy conversation, and not an easy test to go through. First and foremost, for the brown sectors, we have clear red zones. We have made commitments around upstream oil and gas project financing, specifically for approved fields after 2022. We have also committed to exiting coal by 2039. These are areas where we have set firm policies and commitments, and these are not things we move away from when it comes to transitioning brown sectors.
At the bottom line, it’s about engagement with clients. It’s a continuous conversation – understanding where their plans are, what their capital requirements are to deploy technologies, acquisitions, divestments, or whatever else is needed. It’s not as simple as a report card or ticking a box, especially given the energy security concerns and the changing environment within Asean.
Our philosophy is engagement, not divestment. We approach this pragmatically while holding to high-quality commitments. If it were not a complex conversation, we would have solved these issues long ago.
For example, we trained all our relationship managers and frontline business units in 2024 on sustainability, specifically on net zero and decarbonisation, the science behind it, the need for it, and how to engage clients around it.
Our bottom line is engagement, conversation, and understanding our clients’ needs. We support them financially within the guardrails of our publicly stated policies, environmental and social risk policies, and responsible financing principles. This foundation always underpins all the business we do.
Is engagement more effective than divestment?
There is always a challenge with full divestment. Depending on the industry, when banks pull out, companies often turn to different funding sources. In those cases, you lose the ability to engage and have meaningful conversations. If you completely pull yourself out of financing a particular sector, you lose the opportunity to shape and influence those conversations.
That said, there are clear no-go areas where we will say no. Ultimately, if a client is unable or unwilling to demonstrate commitment, it becomes a different conversation. Now we are talking about how they manage potential physical and transition risks. If they can’t manage those risks, that’s a serious concern. But honestly, that stage is still relatively far down the line for most clients.
Completely divesting means that funding sources shift. When funding shifts away from banks – which can engage as consortiums or industry groups to have deeper conversations about shared requirements and regulatory expectations around managing climate-related risk – those dynamics change.
Where do you believe sustainability is headed?
Sustainability is always evolving. What we are starting to see are the fair-weather sustainability supporters coming back and saying: “Well, see, we told you so – it was just a trend.”
But I would argue that we are moving into green industrialisation. One example I love to give is China. A big driver [of this trend] is China’s electric vehicle (EV) industry. Since 2021, China’s EV production has grown exponentially. Back then, EVs were a flat blip on the car manufacturing radar. Now, the latest numbers in 2024 show 5.5 million cars exported from China, with 2 million of those being EVs. Domestically, almost half of all cars sold in 2024 were electric vehicles.
This massive industrial shift means domination in battery technology and installed charging infrastructure, and it’s starting to trickle down into Asean and the rest of the world. The driver was energy independence – China has limited oil reserves, so they had to rely on electricity and build EV capacity. This is causing a huge shift in the automotive industry and China’s impact globally.
So, sustainability isn’t just a “nice thing to have,” or about saving bees – even though I love bees! It’s about a massive industrial shift to green, and that’s how sectors will operate going forward. Sustainability is becoming business as usual. Of course, regulation, laws, and sectoral decarbonisation requirements all come into play, but this is the direction that I believe we are heading toward, which is quite interesting.
The transcript has been edited for brevity and clarity.
