More renewables, less oil & gas
ING’s energy portfolio is aligned with the path to net zero. Today we announced new steps to strengthen that.
The summary? We’ll increase new financing of renewable energy by 50% by year-end 2025, and no longer provide dedicated financing to new oil and gas fields.
But what does that really mean? If you want to better understand ING’s approach to energy, here are some things you should know.
1. Not all energy is the same
In financing the global energy system, we differentiate between power generation and the production and processing of fossil fuels. Power generation refers to the actual way energy is used to make electricity. Here, the source of energy used (renewables, oil, gas, coal) is relevant to understand how the power generated impacts the climate.
We’ve made good progress in our power generation sector financing. We don’t finance any power generation from oil. We stopped new financing to coal-fired power generation in 2015 and pledged in 2017 to exit coal-fired power plants by 2025. We do finance power generation from natural gas, which is the least-damaging fossil fuel. And of course, most of our financing in the power generation sector goes to renewables like wind and solar power.
When financing the production and processing of fossil fuels, we differentiate between extracting oil and gas from the ground (upstream), transportation (midstream), and conversion into fuels (downstream). Looking at the part of that value chain that generates most of the climate impact, we focus our actions on upstream oil and gas.
2. The best way to decrease demand for oil and gas is to increase the availability of renewable energy
The International Energy Agency (IEA) (which basically sets the guidelines for the energy sector to get to the 1.5°C climate goal) stresses that a ‘massive and immediate investment in clean and efficient energy’ is needed. They outline this in their report, ‘Net-Zero Emissions by 2050 Roadmap’. If renewables grow successfully soon enough, the result will be that demand for oil and gas will reduce, and no development of new oil and gas fields will be required.
3. The best way to decarbonise the energy sector is to do it from the inside
It’s clear that the oil and gas industry needs to change. We believe that it’s our role to work with our clients to support them in their transition towards reaching climate goals.
Whether we like it or not, more than 80% of energy used today is fossil-fuel based. Our role is to facilitate change from the inside, setting strict conditions for clients on what we will and won’t finance and helping them improve their sustainability practices as soon as possible.
The oil and gas sector will continue to play an important role in the energy mix for the years to come. Even in a net-zero world, there will still be a need for oil and gas. We’ll continue to support that, while increasing investments in renewables and gradually reducing funding to upstream oil & gas by 12% by 2025 and 19% by 2030. This puts us on track for minus 53% by 2040, in line with the IEA’s net-zero by 2050 roadmap.
We will continue financing energy from solar and wind power, and also support technology innovation in advanced batteries, hydrogen and carbon capture and storage. We aim to increase lending to renewables by 10% per year, every year until 2025.
4. We’re already doing a lot of good work in renewable energy
Over the last five years, ING’s exposure in renewables has more than doubled and now makes up 60% of our power generation portfolio.
There’s more we can do, which is why we’ve set a goal for the yearly amount that we lend to renewables to be 50% more in 2025 compared to 2021.
5. Today’s news is a good step, and there are more steps that still need to be taken
Both our power generation and upstream oil & gas portfolio are already in full alignment with the Paris Agreement’s most ambitious climate goal of 1.5 degrees. What we announced today builds on that even further. And yet, there is always room to do even more, like by expanding the scope of our efforts to include midstream and downstream. We’re actively involved in figuring out the best way to go forward, not only for us but for the banking sector. We’re part of the Net-Zero Banking Alliance’s working group that’s developing guidelines for the whole oil and gas value chain. The working group is expected to deliver its findings by the end of the year.
6. Decarbonisation isn’t the only priority
In developing ING’s energy strategy, we balance three key interests: the need to decarbonise to fight climate change, the need for energy to remain affordable for people and companies, and the need for security of the energy supply. While climate change is one of the world’s biggest challenges, all three of these things are important. The Russian invasion of Ukraine clearly shows how important energy security and affordability is.
In order to balance all three energy interests, we will continue to provide financing to clients active in keeping oil and gas flowing to meet the current and declining future demand set out in the IEA’s roadmap, as well as investing in renewables, infrastructure for the electrification of the economy, and energy efficiency. We will continue to take our responsibility for limiting the impact on climate, with our own steps and measures as well as supporting our clients in their transition to a cleaner future.