ING to align £450bn investment portfolio with Paris Agreement goals

ING has revealed that it will work with the companies covered by its £456m ($600bn) green investment portfolio to help align their respective sustainability strategies with the aims of the Paris Agreement.

The Dutch banking giant announced that it will steer its portfolio towards a 2C trajectory using a new set of metrics called Terra, making it the first investor to adopt a science-based approach.

Developed as part of a partnership between ING and think tank 2C Investing Initiative (2Cii), the Terra model 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.

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

The Terra model will initially be used to track notoriously carbon-heavy sectors, namely energy, automotive, shipping and aviation, steel, cement, residential mortgages and commercial real estate. 

ING will begin tracking these sectors immediately and report the progress of each sector in its Annual Report, the company said in a statement. As trends in progress become clear, ING will begin setting its own voluntary emissions targets for each sector.

Sector-wide shift

In a bid to drive change outside of ING’s portfolio, ING and 2Cii have made the Terra approach openly available to other banks and investors.

“We are confident that the Terra approach will make a valuable impact because it enables us, and the rest of the banking sector, to finance the change the world needs to move towards a low-carbon economy,” the statement reads.

“All banks would benefit from having an industry-wide standard, increasing transparency and therefore our collective effectiveness in fighting climate change.”

In addition to Terra, ING also uses global databases such as independent researcher Sustainalytics to examine current corporate efforts to transition to the low-carbon economy.

Green finance growth

ING, which has been carbon-neutral in its own operations since 2007, has been one of the pioneers of the green finance movement. It issued its first green bond in 2015 and one year later, revealed that it had funded more than €27bn to clients aiming to solve environmental challenges.

Since then, it has launched a €100m Sustainable Investments fund to help start-ups and innovative new business models scale up concepts and projects tailored for energy, water and resource efficiency. Moreover, a goal to double its Climate Finance portfolio by 2022 compared to 2017 has now been introduced to accelerate actions.

Elsewhere, ING has committed to reducing its coal exposure to “close to zero” by 2025, by ceasing to finance utilities that use more than 5% coal-generated power in their energy mix.

ING’s global head of sustainable finance Leonie Schreve recently told edie that stronger internal relations between the finance and sustainability departments within businesses will create more access to green loans and bonds to assist the low-carbon transition. You can read that exclusive interview in full by clicking here.

Sarah George

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