On Thursday, in a significant development that will see the renewable energy industry receive a financial boost, Dutch lender ING stated, it has taken steps to significantly cut on lending to carbon emitting companies in the power industry over the last year.
In a statement ING said in 2019, it had reduced its direct exposure to coal-fired power plants by 22% and increased financing to renewable power generating companies by 1.9 billion euros.
The Dutch bank is part of a group of bankers which are leading the way in a combined 2.4 trillion euros effort to align their lending practices with the 2015 Paris climate agreement, which aims to keep global warming well below 2 degrees Celsius above pre-industrial norms by 2050.
Along with ING, BNP Paribas, BBVA, Societe Generale, Standard Chartered and non-profit think tank the 2° Investing Initiative, have begun developing tools and a scientific methodology to help measure and guide lending decisions.
One of the key aims of the group is being open about their efforts in the hope that other banks follow their lead. Following its inaugural report last year, this is the first time that ING has been able to document its year-on-year progress.
For each of nine high-emitting sectors, ING has defined a multi-year pathway over which the emissions-intensity of its lending, i.e., the level of emissions per unit of economic activity, must change in order to meet the climate goals.
“The biggest improvement was in the impact of the bank’s lending to the power generation sector, where carbon intensity – measured by kilograms of CO2 per megawatt hour – was now 14.9% below the target pathway and ahead of schedule,” said ING.
Similarly, cement and steel sector saw their respective emissions intensity at 0.9% and 0.6% below their pathways, although both form a relatively smaller part of the bank’s loan book.
Such improvements were not across all sectors serviced by the bank. For example, the residential real estate market was 2.4% above the sector’s pathway, which was hit by the slow pace of change in improving energy efficiency in many homes.
The emissions intensity for ING’s automotive and aviation sector lending was broadly in line with the wider market – 0.7% and 0.3% above their respective pathways – given the relatively weak penetration of low-carbon alternatives in both.
In 2021, ING said for the first time it would be able to report on the upstream oil and gas sector after agreeing with a methodology with its peers. It also aims to target an absolute drop in lending to the sector from its current 3,986 million euros.