Bank will speed pace of cuts in lending tied to fossil fuels
ING Groep NV will cut lending to fossil fuel companies at a faster pace than previously planned as the finance industry races to slash its carbon footprint in time to meet goals laid out in the Paris Agreement.
The Dutch bank intends to reduce financing for upstream oil and gas projects by 12 percent from the $4.7 billion it loaned the industry in 2019, according to a revised sustainability report seen by Bloomberg. ING wants to reach the new target in four years, compared with a previous goal of a 19 percent cut in such funding by 2040.
Banks are under growing pressure to prove their loan books aren’t feeding businesses that contribute to global warming. The latest assessment by the United Nations’ Intergovernmental Panel on Climate Change underscored the urgency of the transition that’s needed, as the planet overheats.
The sense of alarm has led the European Central Bank to step up pressure on banks as it prepares for a historic round of stress tests next year to figure out just how exposed the industry is to extreme weather.
“We are fully conscious of the role we need to play,” said Anne-Sophie Castelnau, ING’s head of sustainability.
Like many other banks, ING is going through its loan portfolio to identify the biggest emitters of greenhouse gases as it tries to meet a goal of net-zero carbon emissions by 2050. That’s as nonprofits and activists name and shame laggards. ING says it’s directing more funds to the clean energy sector, with loans to renewables reaching 64 percent of total financing for power generation in 2020.
Aside from oil and gas, the Dutch bank says it will set tougher carbon policies for a number of other sectors including automotive, real estate, shipping, steel and cement, all identified as heavy emitters. Investors are scrutinizing banks’ exposure to climate risk to see how well they’ll handle the transition to a low-carbon economy amid tougher regulations and increasing public pressure. Castelnau signaled that clients with big carbon footprints should expect to face higher loan costs.