ING PP Example Reference 16x9 - June 2015 · ING PP Example Reference 16x9 - June 2015 Keywords:...
Transcript of ING PP Example Reference 16x9 - June 2015 · ING PP Example Reference 16x9 - June 2015 Keywords:...
Herry Cho
Presentation Ⅱ
(Head of Sustainable Finance Asia Pacific, ING Group)Integrating climate in business strategy: ING Terra Approach of
portfolio alignment
[ session 2 ]
ING’s Paris alignment journey
Herry Cho – Head Sustainable Finance APAC
June 2020
Climate Action Conference 2020, Seoul
ING is a Wholesale and Retail bank serving more than 38 million customers across 40 countries worldwide
Empowering people to stay a step ahead in life and in business.
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Direct global emissions:
35%
6%21%
14%
24%
Power andHeating
Buildings
Industry
Transport-ation
Agri/Land Use
We start where our biggest impact lies:
Isabel Fernandez Board Member and Head of WB
“ING commits to steer its entire €600
billion lending portfolio towards the
well-below 2 degree goal of the Paris
Agreement.”
Our commitment to support Paris Agreement goals shared in 2018
Explaining the climate alignment of a bank’s loan book
The methodology allows a bank to answer the following questions:
“What is the impact of our business on climate change?”
External reporting:
Current Exposure:
Per sector: As per today, what does the portfolio’s technology exposure look like?
Internal steering:
Future Exposure:
In 5 years, what will the client / portfolio’s technology exposure look like?
In 5 years, how should the portfolio’s technology exposure look like, in a 2 degree (or below) scenario?
Utilising Terra would give us excellent insights on how to incentivize our business in the future towards
a Paris aligned portfolio
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Terra is a sector-specific, science-based, forward-looking and engagement-driven approach
The Terra approach: our strategy to steer towards Paris
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• 2dii developed methodology for the asset management industry (equity and bond portfolios)
• ING – as the first bank – led the pilot to adapt methodology for the banking industry
• Approach validated with
• Academics
• Banks
• Politicians, civil servants, NGOs and other stakeholders
Validated method to align to 2°C goal
+ four financial supervisors+250 asset managers
2°ii 1 – a global think tank on climate-related metrics and policies in financial markets
Note: 1) https://2degrees-investing.org/
Partners
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1. Compare loans per key sector to 2
degree scenarios
2. Focus on required technological change
3. Use of client level data from external
databases
Key characteristics of Terra Approach
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Draws from two main methodologies for target-setting:
• PACTA• SBTi SDA
Critical principles:
• Sector-based• Uses Physical Asset-level-data• Applies science-based scenarios• Client-focused• One target per sector• Apply the best-fit methodology
per sector
The Terra Approach overcomes the issue of limited data availability for most sectorsVia external Business Intelligence databases Terra has access to global asset level data at client level
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Forward-looking data on production capacity
22,000 Oil and Gas Fields
2,000 coal mines
>100,000 power plants
95 million produced cars
36,000 airplanes
10,000 ships
2,200 cement factories
13,000 steel plants
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This means different things need to happen in each sector
Power industry:over time, close down e.g. coal power
plants, and invest in a massive growth in renewables (hydro, sun and wind).
Gas and nuclear are needed as transition fuels.
Automotive industry: change from internal combustion
engines to electric vehicles
Fossil fuels:Move quickly away from coal, slowly
decrease oil production and temporary increase in gas to help the power sector
transition
• Methodology does not allow you to compensate between different sectors. These changes simply need to happen.
• We want to engage our clients in this conversation.
Steel and Cement production: Lower CO2 emissions though more modern factories and operational
improvements
Aviation and Shipping: Lower CO2 emissions per mile travelled
through changing fleets, operational efficiency, biofuel use,
etc.
Real Estates/ mortgages: Improve insulation, increase renewable
power installations
Terra methodology looks at the market today and required changes: Banks finance change
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Ca
pa
city
(M
W)
Capacity
CoalCap OilCap GasCap
NuclearCap HydroCap RenewablesCap
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-10000
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Ca
pa
city
ch
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ge
(M
W/a
)
Capacity changes per year
CoalCap OilCapGasCap NuclearCapHydroCap RenewablesCap
Aligning to the changes needed
IEA 2DS scenario (total capacity need per technology type) IEA 2DS scenario (new capacity need per technology type)
Aligning to the market today
Example: Power
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PACTA allows us to match asset-level data to our portfolio (bottom-up) and benchmark this against climate scenarios.
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Setting a target
requires a normative
benchmark: each
sector has its own
technological transition
described by external
scenarios, that’s why
we need a sector-
specific approach for
target setting
Terra Progress Report 2019
Global Sustainability, ING Group
Our Approach to climate action
New York| September 25, 2019
Sector in Scope Measurement Methodology Target-setting Methodology Primary output Reporting Metric
Power PACTA PACTA Technology Mix kg CO2/MWh
Automotive PACTA PACTA Technology Mix kg CO2/km
Cement PACTA SBTi SDACO2 intensity per
unit of productionkg CO2/ tcement
Real Estate Delta Plan (NL) Paris Proof Method (NL) EPC Distribution kg CO2/m2
Mortgages PCAF (NL, DE) SBTi SDA EPC Distribution kg CO2/m2
Fossil Fuels PACTA PACTA In progress In progress
Steel PACTA SBTi SDACO2 intensity per
unit of productionkg CO2/tsteel
Shipping Poseidon Principles Poseidon Principles kg CO2/ tNM kg CO2/ tNM
Aviation PACTA SBTi SDA kg CO2/passenger km kg CO2/passenger km
The Terra ‘tool box’ of methodologies
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Portfolio view - Outstandings as of year-end 2018
Power Generation Automotive Commercial Real Estate
ShippingAviation
Steel Fossil FuelsResidential Real Estate Cement
On track Under developmentNot on track Unavailable
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100
200
300
400
500
600
GH
G in
ten
sity
(kg
CO
2e
/MW
h)
Global and OECD Decarbonisation Pathways
SDS Scenario OECD SDS Scenario Global Market
ING Portfolio ING Target Convergence Pathway
0.00
0.05
0.10
0.15
0.20
0.25
GH
G in
ten
sity
(kg
CO
2e
/KM
)
Global Pathway to Zero Tailpipe Emissions
B2DS Scenario Market ING Portfolio ING Target Convergence Pathway
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5
10
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GH
G In
ten
sity
(kg
CO
2e
/m2
)
European Union Decarbonisation Pathway
B2DS (EU) Scenario ING Portfolio ING Target Convergence Pathway
0
10
20
30
40
50
60
GH
G In
ten
sity
(K
gC
O2e
/m2)
NL Decarbonisation Pathway
Delta Plan Target ING Portfolio ING Ambition Convergence Pathway
0.0
0.1
0.2
0.3
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GH
G In
ten
sity
(tC
O2e
/tce
me
nt)
Global Decarbonisation Pathway
B2DS Scenario Market ING Portfolio ING Target Convergence Pathway
Climate Alignment Dashboard (CAD) – Outstandings YE 2018
Power Generation
0
100
200
300
400
500
600
GH
G in
ten
sity
(kg
CO
2e
/MW
h)
Global and OECD Decarbonisation Pathways
SDS Scenario OECD SDS Scenario Global Market
ING Portfolio ING Target Convergence Pathway
Zooming in: Power Generation
Scope
• Outstandings in scope: €7.6 billion
• OECD/non-OECD split: 90/10 (outstandings)
Our performance
• On Track: outperforming the market andscenarios
• Roughly half of the portfolio financesrenewables.
• Our coal policy will mean close to zero coal by 2025
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Current technology mix vs. new capacity additions of ING’s Automotive portfolio
Enabling Client Engagement: Automotive example (dummy data)
… it’s not just about
financing the ‘green’
companies today, but
also financing those
with a ‘green’
investment profile for
tomorrow
Car Co.
Company G
Comp K
Comp E
Comp F
Inv
est
me
nts
in
ne
w l
ow
ca
rbo
n (
EV
) ca
pa
city
vs
be
nch
ma
rk
Today’s technology mix compared to market
Worse than the market Too little or no build-out
Better than the market Too little or no build-out
Better than the market Build-out > benchmark
Worse than the market Build-out > benchmark
Loan size
> €50m
€25m-€50m
€10m-€25m
Out performingUnder performing
58%22%
20%
ICE Vehicle Capacity
EV Capacity
Hybrid Capacity
42%Low
carbon
Car Co.’s mix 2018
Investment profile
..% ..% ..%
Company XX
Company D
Company C
Company B
Company AComp
M
Comp L
Comp N
Comp x
Comp.z
ING to ENGAGE
ING to EXPAND
Company J
Comp I Low
carbon
Having impact means going beyond ING – we need collaboration across the sector
The Katowice Commitment
At COP 24 in Katowice, four international
banks joined ING in pledging to align their
loan portfolios with global climate goals.
This is a combined lending of >€2.4 trillion
+
30 banks globally
• Stakeholder feedback for methodology refinement
• Finalizing the analysis for the remaining four sectors & update CAD annually
• Ongoing participation in the current initiatives: SBTi, PACTA pilot, UNEPFI PRB
• Coming up with actual future steering methodology
• The cherry on top: Understanding our impact
Next steps
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