ING Directs €500-Billion Lending Portfolio Toward Paris Targets with ‘Science-Based Approach’

Amsterdam-based financial institution ING Groep N.V. has unveiled plans to direct its €500-billion lending portfolio toward meeting the Paris Agreement target of holding average global warming to 2.0°C or less.

In a release this week, ING says it came up with a “cutting-edge, precise method to do this”, after first attempting an approach that didn’t work.

“ING had been working for several years to figure out the best way to measure the climate impact of its lending portfolio,” the company states. “After piloting a financed-emissions approach that ultimately could not be used, ING sought alternative methods for measuring and steering.”

Early this year, ING formed a partnership with the 2˚ Investing Initiative to extend that organization’s existing framework for analyzing stock portfolios to cover corporate lending. ING calls the resulting framework the Terra approach, and suggests it “could become the standard for how international banks set science-based targets”.

“Banks have a responsibility to finance change and we are stepping up to that,” said Isabel Fernandez, head of ING Wholesale Banking. “All banks will benefit from having an industry-wide standard, greater transparency on their alignment with the climate goals of the Paris Agreement and, as a result, collective effectiveness in fighting climate change.”

“We are delighted that a multinational bank such as ING helped us pioneer this methodology for financial service providers,” said 2°ii Managing Director Jakob Thomä. “The methodology—and its resulting two-degree aligned portfolios—will be an important contributor to combating climate change. We hope other banks will follow suit and adopt it as well.”

The partners’ “science-based approach” could have a significant impact, enabling banks “to direct their money towards financing technologies that support a low-carbon future instead of those that only measure a carbon-rich past,” the ING release says. The model “concentrates on the technology changes that companies in those sectors need to make in order to be aligned with the climate goals of the Paris Agreement. For example, it is not enough for automotive companies to lower emissions by producing fewer petrol-powered cars—they have to manufacture more electric cars, too.”