Published on September 21st, 2018 | by Joshua S Hill0
ING To Steer €500 Billion Portfolio Toward Paris Agreement Goals
September 21st, 2018 by Joshua S Hill
Dutch banking giant ING announced last week that it would begin to steer its €500 billion lending portfolio toward meeting the Paris Agreement well-below 2°C warming target, starting by committing to using science-based scenarios to direct its business strategy.
ING made the announcement early last week, revealing its commitment and the creation of what it describes as “an innovative, accurate way to measure our portfolio” which it has called the Terra approach — measurement which “looks at the technology shift that’s needed across certain sectors to keep the rise of global temperatures to well below two degrees Celsius.” Designed in partnership with the 2˚ Investing Initiative (2˚ii), Terra then measures the necessary shift in technology against the actual technology its clients are using and planning on using. The Terra approach, therefore, according to ING, “works in such a way that it doesn’t only tell us what needs to shift, but how much and by when.”
“Banks have a responsibility to finance positive change and we are stepping up to that,” explained Isabel Fernandez, head of ING Wholesale Banking. “We believe the Terra approach will enable us to make a real difference.”
ING’s Terra approach focuses on sectors considered the most greenhouse gas intensive — the energy sector (including oil, gas, renewables, and conventional power), automotive, shipping and aviation, steel, cement, residential mortgages, and commercial real estate. Specifically:
- We’ll use scenarios for the sectors responsible for most greenhouse gas emissions. These outline which technology must shift, by how much and by when to keep the rise in global temperatures to well below two degrees.
- We measure that needed shift in technology against the actual technology clients are using today and planning on using in the future. Where relevant, we’ll look at whether individual clients have a strategy to adequately shift away from greenhouse-gas-intensive technologies towards greener technology.
- We’ll support clients on their path to a sustainable future and are seeking to support potential clients that are contributing to the technology shift needed.
- We measure our loan book to see whether it’s aligned with the shift to a low-carbon society.
“We are delighted that a multinational bank like ING helped us pioneer this methodology for financial service providers,” said Jakob Thomä, managing director of 2˚ii. “The methodology – and its resulting two-degree aligned portfolios – will be an important contributor to combating climate change. We hope other banks will follow suit and adopt it as well.”
Terra will be open to other banks and ING is already in dialogue with other banks and stakeholders.
“All banks will benefit from having an industry-wide standard, greater transparency on their alignment with the climate goals of the Paris Agreement and, as a result, collective effectiveness in fighting climate change,” added Fernandez.