Standard Chartered is to stop financing new coal-fired plants anywhere in the world, save where the bank already has committed to funding.

The move has been hailed by environmental groups as being a benchmark for other banks in the project finance sector. Standard Chartered had already committed to not funding any new thermal coal mines, arctic and tar-sands exploration and production, as well as the conversion or degradation of high-value forests and peatlands.

It marks one of the most significant commitments from a global bank in recognition of the Paris Agreement on Climate Change and is a big change in direction from Standard Chartered, which has been heavily involved in the coal sector, particularly in emerging markets.

According to lobby group Market Forces, the bank has loaned US$1.8bn to coal power since 2010. The group expects Standard Chartered to now withdraw from syndicated loans it was potentially set to be involved in in Vietnam.

Earlier this year, there was some surprise when the bank did not appear on the ticket of the Nghi Son 2 project financing in Vietnam. Standard Chartered had been considering participating in the US$1.87bn financing along with the Export-Import Bank of Korea (Kexim), SMBC, MUFG, Mizuho, Shinsei Bank, OCBC, DBS and Malayan Banking Berhad, but had been accused of breaching its own environmental standards by lobbyists.

It is now being praised by NGOs for its about-turn.

“This is what leadership on coal and climate change looks like. Decisions about how the world sources its future energy needs will make or break our ability to contain global warming. Standard Chartered’s policy not only removes a critical source of finance for new coal power plants, but sends a powerful signal to its competitors,” says Market Forces executive director, Julien Vincent.

Multiple other banks, including HSBC, Singapore’s big three (DBS, OCBC and UOB), Japan’s big three (MUFG, SMBC and Mizuho) have updated their policy for coal this year, but have not made a commitment as sweeping and deep as Standard Chartered.

“While Standard Chartered’s banking sector peers have fiddled around the margins with their coal policies, leaving the door open to finance new coal plants of particular types or in particular locations, this is the only policy that recognises the clear, scientific reality: if we’re to avoid runaway climate change we need to stop building new dirty coal power plants,” Vincent says.

The bank’s chairman, José Viñals, says: “We have arrived at our decision on coal following an extensive consultation process with all of our stakeholders, including clients, employees, shareholders, NGOs and governments. Through this process, we have listened to and reflected on all sides of the debate.”

Last week, ING announced that it would work with companies in its US$600bn green investment portfolio to align their strategies with the aims of the Paris Agreement. The bank is to introduce a set of metrics known as Terra, which will assess how clients can improve their technology as a means of keeping global temperatures well below 2°C.

“Banks have a responsibility to finance positive change and we are stepping up to that. We believe the Terra approach will enable us to make a real difference. There’s no time to lose,” said ING’s head of wholesale banking, Isabel Fernandez, in a statement accompanying the bank’s new commitment.

Both banks have spoken extensively about the potential market size of renewable energy projects. In the US, for instance, the cost of wind energy has fallen by two-thirds since 2009, and is estimated to fall by another 50% by 2030.

“There is no reason why the benefits of cheap, abundant, clean energy should be confined to richer industrialised nations and not shared with emerging markets; indeed, we are already working with communities in our markets to develop off-grid sources of renewable energy,” Viñals says.