The Dutch bank will identify those clients that are leading the transition to a low-carbon economy and need its help the most
In a move to align its business strategy with the Paris Agreement’s goal of limiting global warming well below 2°C, the Dutch bank ING has decided to manage its €500-billion ($588-billion) lending portfolio towards helping companies meet the target.
Before lending money, the bank will evaluate how companies are performing to meet the Paris Climate Accord’s target. It would apply its finance to help bring carbon-intensive sectors in line with the level of decarbonisation required to fight climate change. It will also continue to offer sustainability loans, which give companies a better credit rate if they continue to meet their targets. The bank has reportedly provided 15 “sustainable improvement loans” in the past two years.
Claiming to be the "the first global bank to commit to using science-based scenarios to steer our business strategy", ING announced the creation of what “an innovative, accurate way to measure our portfolio” that “looks at the technology shift that’s needed across certain sectors to keep the rise of global temperatures to well below two degrees Celsius.”
The ING’s approach towards measuring their lending portfolio—called Terra approach—focuses on sectors responsible for most greenhouse gas emissions: energy, automotive, shipping and aviation, steel, cement, residential mortgages, and commercial real estate.
"Applying it (terra approach) to these sectors will allow us to identify those clients that are leading the transition to a low-carbon economy as well as those that need ING's help the most. It will show us whether our lending is adding up to contribute to climate resilience or not," reads an official communiqué of ING Bank issued last week.
Under this approach, assessment is done on low-carbon technology shift required across the most carbon-intensive sectors and then measures companies' progress. The bank looks at whether individual clients have a strategy to switch from greenhouse-gas-intensive technologies to greener technology.
“We measure our loan book to see whether it’s aligned with the shift to a low-carbon society,” the communiqué concludes.
We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.
Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.