How ING achieved boardroom buy-in to launch its second green bond
EXCLUSIVE: Banking giant ING was able to launch its second green bond earlier this month due to its past experience in structuring external green bonds for sustainability-conscious clients, the firm's global head of sustainable finance Leonie Schreve has claimed.
The Dutch bank this month began its second green bond transaction, launching a 12-year €1.5bn and seven-year €1.25bn green bond, just three years after unveiling its first green bond in what was then a fledgling market.
With the first bond having raised around €1.2bn for sustainable projects across all sectors, the generated funds from the second will be put towards a combination of ING’s new and existing loans in the renewable energy and built environment sectors.
Speaking exclusively to edie, ING’s Schreve explained that the bank’s past actions on green bonds and its willingness to lead the green finance market as it develops were “instrumental” to the launch of the new bond.
“We believe sustainable business is better business and by focusing on forward-thinking companies that are driving change to become more sustainable, we will have a positive impact on business in the long term,” she explained.
Actions the company has taken to evidence that ethos in recent times included launching its first own green bond in 2015, funding more than €27bn to clients aiming to solve environmental challenges and structuring a total of 12 other green bonds for clients during the first three months of 2018, according to Schreve.
“These have all been important steps, leading us to where we are today with the launch of our second own green bond,” she added. “The second half of 2018 showed even more growth.”
Before ING launched the second bond, the bank ensured that it was pre-certified by the Climate Bonds Initiative.
With a loan book of more than €500bn, green finance is just a small fraction of the bank’s dealings. However, the launch of the new bond comes as ING strives to meet a goal of doubling its Climate Finance portfolio by 2022, against a 2017 baseline.
Announced earlier this year, the aim, if achieved, will see ING hold a “sustainable transitions financed” portfolio of €35bn. As of December 2017, ING had €14.62bn in its climate portfolio and a further €468m in its social impact portfolio.
Schreve explained that, by funding a green loan portfolio across renewable energy and green buildings categories, the new bond would help ING meet this target while assisting businesses on their own sustainability journeys.
Only funding to “companies and sectors that are pro-actively addressing sustainability in their businesses” would count towards ING’s 2022 goal, Schreve added.
The launch of the new bond comes shortly after ING unveiled measures to help the companies covered by its green investment portfolio align their respective sustainability strategies with the aims of the Paris Agreement – the first move of its kind by a European bank.
To achieve this alignment, the firm adopted a new set of metrics called Terra, which assesses how much of a technology shift is needed to keep the rise of global temperatures to well below 2C across each sector.
The model then measures the required shift in technology against the actual technology ING’s clients are currently using or are planning on using in the future, enabling the bank to invest in companies driving the low-carbon transition in their respective sectors.
The moves by ING comes at a time when the green finance market is continuing to grow at an exponential rate – despite still being in its infancy. The green bonds market, for example, grew by a staggering 78% between 2016 and 2017, with national and institutional investors funnelling more than $150bn into low-carbon projects.
Nonetheless, green bonds still account for just 2% of the global bond market, according to HSBC. Moreover, financial experts at Nordic bank SEB, have predicted that global green bond issuance could “plateau” at 2017 levels next year.
ING at edie’s Sustainability Leaders Forum
ING’s global head of sustainability Léon Wijnands will appear at edie’s Sustainability Leaders Forum next February to discuss how companies can best engage investors with sustainability issues.
Taking place 5 & 6 February 2019 at the Building Design Centre, London, the two-day event will also include debates on the future of climate finance and climate risk reporting.