Sustainable transitions financed
Sustainability for us is not just what we do as a business it is how we do it. We earn our licence to operate and the trust of our customers by conducting our business in a responsible way.
We also see sustainability as a source of competitive advantage. Being sustainable is not just about reducing our own footprint, it is in all the choices we make – as a lender, as an investor and through the services we offer our customers. We continue to believe that financial services play a significant role in creating a healthy and sustainable world. We can help facilitate the transition to a fairer, greener economy by financing projects that accelerate clients’ sustainable transitions and supporting clients that contribute solutions to environmental and social challenges.
Environmental and social risk management
As an international financial institution, we are in a position to influence the economy through the ways we channel the flow of money entrusted to us. With this influence comes responsibility. For us, this means making choices about how, where and with whom we do business and being transparent about these transactions.
ING’s environmental and social risk management framework applies to our global operations. However, our corporate clients often have more significant environmental and social impacts. Hence, we focus on assessments and promote ESR dialogue to support these clients in managing their environmental and social impacts. Corporate customers account for 30.0% of our total lending portfolio. We strengthened our support in 2014 by incorporating systematic and automated ESR assessments into mainstream data systems for client information and for lending data.
ESR Policies text
Our financing and investment policies as well as our broader business ambitions are structured around strongly embedded social, ethical and environmental criteria. An extensive ESR policy framework is there to guide our decisions for client engagement and assessing finance proposals. An overview of our ESR policies (PDF 809 KB) is available for download. Other sustainability policies (PDF 172 KB) can be downloaded here.
An example of how our policies form part of our client engagement process:
ING’s dedicated ESR department advises on potential environmental and social sensitivities at both the client and transaction level. Every client of ING is assessed against the requirements of the ESR Policy framework to ensure compliance before we do business. This is followed by continuous monitoring and evaluation once the business engagement is clinched. The process and governance model is explained in the image.
The outcome of the Client ESR Assessment together with the outcome of the Transaction ESR Assessment will determine the overall risk profile of the business engagement and approval process thereafter.
The table below illustrates the combinations and outcomes of the Client and transaction ESR Assessment:
Applying the Equator Principles (EP)
As an Equator Principles Financial Institution (EPFI) we do not provide project finance or project-related corporate loans to clients that are unable or choose not to comply with the principles. We also implement EP in our internal environmental and social policies, procedures and standards. These are embedded in our ESR Framework, and require involvement of the following three banking areas:
- Front Office: The departments that originate transactions and have direct contact with clients or sponsors.
- Risk Managers: The departments which provide control over Front Office activities and generally can sign off on the environmental and social impacts for ’Low Risk’ EP deals i.e.
- Environmental and Social Risk: The dedicated department within risk management that assesses environmental and social impacts associated with ’High Risk’ transactions.
Read more about ING’s approach to the Equator Principles and 2014 EPIII Reporting.
An example of how the Equator Principles form part of our transaction assessment:
Sustainable Transitions Financed
Sustainable transitions financed (STF) describes all the business that we do with clients that are environmental trendsetters in their sectors and projects that provide sustainable solutions.
Part of our STF business is carried out by the Sustainable Finance team, which drives and promotes sustainable business opportunities within ING. By focusing on clients and projects with outstanding sustainable practices, we strive to ensure a healthy and strong portfolio and support tomorrow’s economy.
In 2016, Wholesale Banking introduced an ambition to increase our STF to EUR 35 billion by 2020. At year-end 2016, our STF amounted to EUR 34.3 billion. This is an increase of more than EUR 10 billion compared to year-end 2015, driven partly by new transactions and partly by continuous improvement of our processes for identifying sustainable transactions and clients. (See graph ‘sustainable transitions growth’ for a breakdown of STF growth.)
To drive growth, we train and encourage employees to engage with our clients in finding strategic financing solutions for their sustainability ambitions. Such solutions are provided through a variety of products, including corporate loans and project finance loans.
We also offer finance through innovative green products like green loans and green bonds. Thanks to increased efforts to drive sustainable business in 2016, we have nearly met our 2020 ambition. In order to maintain this momentum and further accelerate sustainable transitions, we will revisit our 2020 ambition in 2017.
Our Groenbank (‘Green bank’) offers our corporate customers in the Netherlands advice and green banking products. ING Retail clients can also deposit their savings or buy notes in ING Groenbank. All projects financed by the Groenbank are certified by the Dutch government as environmentally friendly.
The energy sector is also central to a sustainable future. ING’s Utilities, Power and Renewables team strives to bridge investment gaps in clean power technologies and innovation. We also call upon governments to create (tax and legal) incentives for long-term investments.
Buildings make up roughly 40 percent of global emissions. As such, Real Estate is one of the sectors where improvements in energy efficiency can have a large impact on lowering CO2 emissions.
Our transactions increasingly involve high-grade sustainable real estate collateral. In the Netherlands, for example, we support clients through our innovative sustainability app and with the transition to a sustainable portfolio.
At year-end 2016, Sustainable Real Estate Finance totalled EUR 7.2 billion, making up 23 percent of the total REF portfolio. This represents year-on-year growth of EUR 6.2 billion. This growth is largely due to an improved data collection process, which allowed us to identify existing loans that qualify as sustainable. At the same time, developing innovative tools and green products for clients, training staff, and setting ambitious targets helped drive new sustainable business.
|Total Sustainable Transitions Financed|
|in EUR million at year-end||2016||2015||2014|
|ING Groenbank 1||745||875||836|
|Renewable Energy 2||4.658||3.187||1.730|
|Sustainable Real Estate 3||7.207||998||389|
|Other projects 4||1.638||1.274||379|
|Environmental Outperformers 5||20.020||17.470||16.142|
- ING Groenbank finances projects within and outside of the Netherlands. In line with Dutch tax authority guidelines, the amount of green loans on the Groenbank balance sheet is over 70%. For more details on ING Groenbank, please see the “Retail Banking” chapter of our Annual Report.
- Includes biomass, geothermal, hydro, solar, offshore and onshore wind power generation. In 2016, we improved the process for extracting renewables data from our system, which gives a more complete overview of our exposure.
- The 2016 figure of sustainable real estate grew by EUR 6.2 billion. This is largely due to an improved data collection process, which allowed us to identify existing loans that qualify as sustainable. At the same time, developing innovative tools and green products for clients, training staff, and setting ambitious targets helped drive new sustainable business.
- Includes projects involving energy efficiency, greenhouse gas reduction, climate change and mitigation, waste-to-energy, public transport, waste reduction, social welfare.
- As of year-end 2014, ING reports on loans to clients who have been identified as environmental outperformers based on independent reputable data provider or internal client assessments.
Sustainable assets under management
ING has been providing socially responsible investment (SRI) strategies for customers in select retail countries since 1999. SRI strategies consist of dedicated portfolios of sustainable investment funds, or portfolios of bonds and equity of individual sustainable companies.
Retail customers in Belgium, Luxembourg, Germany and the Netherlands are given the opportunity to invest in SRI investments. In the Netherlands, the bank applies a best-in-class assessment and excludes companies in specific sectors, such as tobacco or coal mining, as well as companies that exhibit controversial behaviour, such as violations of human rights.
In other countries, it is only possible to invest in sustainable funds that use these screening methods. SRI opportunities cover all asset classes, including government bonds, corporate bonds, investment funds and index trackers.
How are we doing?
- Our goal: we will increase our sustainable assets under management.
- Our performance in 2016: our sustainable assets under management for customers increased to 3.315 billion, up 22% from EUR 2,573 million in 2015.
- Our ambition: We will increase our financing of sustainable transitions to EUR 35 bln by 2020.
- Our performance at year-end 2016: EUR 34.3 billion sustainable transitions financed, an increase of 44% compared to year-end 2015.