ING strengthens 2030 climate targets for high-emitting sectors

ING first announced the Terra approach to sector-specific decarbonisation plans four years ago

ING announced back in 2018 that it would steer its portfolio towards a 2C trajectory – the less ambitious of the two warming pathways outlined in the Paris Agreement. It launched a new set of metrics and processes, known as Terra, to track the decarbonisation of its financed activities.

The bank subsequently joined initiatives such as the Race to Zero and the Net-Zero Banking Alliance as climate science improved and the importance of the 1.5C pathway of the Paris Agreement became clearer to policymakers and in the private sector.

This week, it published its latest climate report, confirming new emissions goals for financed activities in the nine high-emitting sectors it regards as a priority under Terra. Eight of them are badged as aligned with net-zero on a 1.5C pathway, with shipping being the only exception at present. Across the eight sectors, ING has more than €330bn of activity.

ING’s activities in the residential real estate, cement, steel, automotive and aviation sectors are all given net-zero targets for 2050, up from their previous 2C-aligned goals for this year. They are also given interim 2030 goals for the first time.

Its 2025 climate target for upstream oil and gas activities, meanwhile, is built upon with a 2050 net-zero target. In the commercial real estate sector, an existing 2050 net-zero target is bolstered with interim goals through to 2030. ING maintains its 2040 net-zero target for the power generation sector and has set interim 2030 targets.

The report also looks at whether these sectors have, to date, aligned with the pre-existing emissions goals set by ING. It reveals that the bank’s activities in shipping, power generation, upstream oil and gas and commercial real estate were all exceeding low-carbon transition requirements. The automotive industry also decarbonised slightly more rapidly than ING’s requirements.

At the other end of the scale, ING’s financed activities in aviation generated emissions far greater than its required benchmark. Steel was also classed as off-track.

“Aviation comes out well above the pathway due to the extraordinary impact that Covid-19 has had on the sector, although it is beginning to trend back to its decarbonisation pathway as the sector recovers,” ING said in a media statement.

ING has stated that it takes an engagement-first approach to decarbonisation. Divestment is undertaken as the final port of call.

TCFD disclosures

The report from ING is the first to disclose climate risks in a manner consistent with the framework from the Task Force on Climate-related Financial Disclosures (TCFD). TCFD-aligned reporting is set to become mandatory in several geographies in the coming years, including all G7 nations, following the UK’s first mandate introduction this April.

TCFD reporting requires companies to describe how decision-makers are informed about – and acting on – climate risk in the short-term, mid-term and long-term. It also requires measuring and describing climate related risks and opportunities across the value chain, in a variety of warming scenarios.

The report states that ING measures physical and transition risks and is preparing for future reporting mandates. Physical risks classed as acute include extreme weather events such as flooding and wildfires. ING also notes the ‘chronic’ risks resulting from global warming, changing precipitation patterns and rising sea levels. These trends, the report states, will damage property and livelihoods, impact worker productivity and increase commodity prices.

Unlike most TCFD supporters, ING has completed stress tests and scenario analysis. These tests assess what would happen in a range of different risk scenarios, designed to help catalyse action to achieve the best possible scenario but to prepare for worse scenarios.

A sweep of 200 corporate reports by the UK’s Financial Conduct Authority (FCA) earlier this year found that the vast majority claimed their reporting were consistent with the TCFD’s requirements on risk management (88%) and improving corporate governance (98%). The proportion was lower for those claiming their reporting met all TCFD criteria on developing strategies, metrics and targets for reducing risk and realising opportunities.