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<\/p>\nING had been working for several years to figure out the best way to measure the climate impact of its lending portfolio. After piloting a financed-emissions approach that ultimately could not be used, ING sought alternative methods for measuring and steering.<\/p>\n
In early 2018, ING partnered with 2\u02daii to extend the initiative\u2019s existing 2\u00b0C scenario analysis framework for equity and bond portfolios\u2013 the so-called Paris Agreement Capital Transition Assessment or PACTA tool \u2013 to corporate lending portfolios. As a result, 2\u02daii and ING have together taken the lead and successfully developed a methodology that could become the standard for how international banks set science-based targets. ING calls this the Terra approach.<\/p>\n
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\u201cWe are delighted that a multinational bank such as ING helped us pioneer this methodology for financial service providers,\u201d said Jakob Thom\u00e4, managing director of 2\u02daii. \u201cThe methodology \u2013 and its resulting 2\u02daC-aligned portfolios \u2013 will be an important contributor to combating climate change. We hope other banks will follow suit and adopt it as well.\u201d<\/p>\n
Compared to other measurement approaches, this science-based approach could ultimately have a significant impact because it enables banks to direct their money towards financing technologies that support a low-carbon future instead of those that only measure a carbon-rich past.<\/p>\n
The approach focuses on the sectors that produce the most greenhouse gas emissions. It also 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 \u2013 they have to manufacture more electric cars too.<\/p>\n
\u201cBanks have a responsibility to finance change and we are stepping up to that,\u201d said Isabel Fernandez, head of ING Wholesale Banking, who will announce the Terra approach in her speech at the Global Climate Action Summit in San Francisco today. \u201cWe believe the Terra approach will enable us to make a real difference.\u201d<\/p>\n
Like the PACTA tool, the Terra approach is open-source. ING is collaborating with other banks and stakeholders to encourage them to also work with this methodology.<\/p>\n
\u201cAll 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,\u201d added Fernandez.<\/p>\n