The Dutch bank ING has decided to lend its €500-billion ($588-billion) only after it has evaluated how companies are performing to meet the Paris Climate Accord’s target.
The ING’s approach towards measuring their lending portfolio—called Terra approach—focuses on sectors responsible for most greenhouse gas emissions: energy, automotive, shipping and aviation, steel, cement, residential mortgages, and commercial real estate.
It would apply its finance to help bring carbon-intensive sectors in line with the level of decarbonisation required to fight climate change. It will also continue to offer sustainability loans, which give companies a better credit rate if they continue to meet their targets. The bank has reportedly provided 15 “sustainable improvement loans” in the past two years.
Claiming to be the “the first global bank to commit to using science-based scenarios to steer our business strategy”, ING announced the creation of what “an innovative, accurate way to measure our portfolio” that “looks at the technology shift that’s needed across certain sectors to keep the rise of global temperatures to well below two degrees Celsius.”
“Applying terra approach will allow us to identify those clients that are leading the transition to a low-carbon economy as well as those that need ING’s help the most. It will show us whether our lending is adding up to contribute to climate resilience or not,” reads an official communiqué of ING Bank issued last week.
Under this approach, assessment is done on low-carbon technology shift required across the most carbon-intensive sectors and then measures companies’ progress. The bank looks at whether individual clients have a strategy to switch from greenhouse-gas-intensive technologies to greener technology.
Reference- DownToEarth, ING PR, Bloomberg