Malaysia's CIMB plans to phase out coal from its portfolio entirely by 2040, becoming the first bank in the country and in southeast Asia to commit to a coal-exit strategy with a deadline.

The Kuala Lumpur-based financial services group announced its "coal sector guide" yesterday, which detailed plans to prohibit asset-level or general corporate financing for new thermal coal mines and coal-fired power plants, as well as mine expansions, except where there is an existing commitment. It also expects companies such as electricity utilities that rely on coal as a fuel source to provide a diversification strategy to reduce the share of coal in their power mix.

CIMB's plans, thought to be the strongest climate action policy in the southeast Asian financial sector yet, are expected to come into effect next year and span all its operating markets.

The Institute for Energy Economics and Financial Analysis (IEEFA) said that CIMB's guide "surpass[es] the pledges made by Singapore's big three finance groups in 2019". The commitments made by Singapore's banks did not include a portfolio phase-out date or a commitment to withdrawal from coal at the corporate financing level, according to IEEFA.

"We are aware that our role as a financial intermediary puts us in a critical position, as our financing decisions and financial offerings can help to shape the long-term trajectory of economic development. The release of the guide is a milestone that represents our continuous progress on the sustainable financing front," CIMB group chairman Mohd Nasir Ahmad said yesterday. CIMB is the fourth-biggest company in Malaysia and has provided $2.68bn in loans and bonds to the coal sector over the past decade — the highest compared with local rivals Malayan Banking (almost $1.8bn) and RHB Bank ($435mn), according to research from Australia-based climate activist group Market Forces.

The move supports the agenda of Bank Negara Malaysia, the central bank, to build climate resilience within the Malaysian financial sector and is the latest CIMB's efforts towards a "sustainability journey" it started "just two years ago". CIMB instituted last year its first group sustainable financing policy as a framework to manage its exposure to sustainability risks, requiring its "high sustainability risk sector" clients such as palm oil, forestry, and oil and gas to meet its environmental and social standards at the point of acquiring financing.

Tim Buckley, director of energy finance studies at the IEEFA, said CIMB was the "first globally significant financial institution in the developing world to commit to a coal exit strategy" and lauded its plans as a "very important milestone in the global efforts to align with the Paris agreement".

Other major banks in the Asia-Pacific region have also recently stepped up efforts to exit coal financing given a global push for a low-carbon transition. Australian bank ANZ announced plans to exit all lending to companies with exposure to thermal coal by 2030 and Japan's Sumitomo Mitsui Banking and Mizuho Bank withdrew from domestic and overseas coal-fired power development projects as of 1 May and 1 June this year, respectively.

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