The world needs nature to thrive, and nature needs rich biodiversity
Biodiversity is the variation of and interaction among all life on earth. Its loss is among the top global risks to society, according to the World Economic Forum, posing a danger to both human wellbeing as well as economic prosperity.
Next to the overall value of biodiversity for society, many businesses also count on the services that nature provides. Agricultural businesses depend on pollination of crops by insects and on soil fertility caused by the interaction between organisms. Construction companies need natural resources, such as wood and purified water. Pharmaceutical companies depend on natural ingredients to create medicines. The list goes on. If the rapid decline of biodiversity continues, the livelihood of many businesses is at stake. This has an impact for banks as well: ING thrives if our clients thrive and our clients thrive when nature thrives. We need to manage risks related to biodiversity loss and help clients find opportunities to do business in a way that’s in harmony with nature.
Biodiversity and climate change are closely connected
There is a strong connection between biodiversity loss and climate change. On the one hand, climate change is one of the main drivers of biodiversity loss, as rising temperatures can eventually lead to the destruction of entire ecosystems. On the other hand, biodiversity can make substantial contributions to climate change mitigation and adaptation. Reducing deforestation for example, is a priority for protecting biodiversity and can make major contributions to climate mitigation. Especially when combined with other efforts to reduce emissions of greenhouse gasses. For more information, read our stance on deforestation.
That’s why we approach these topics together. Biodiversity risks and climate risks are managed together via our Environmental and Social Risk (ESR) policy framework. With our effort to align our lending portfolio towards meeting net-zero climate goals, which is called our Terra approach, we engage our clients to help them align as well. This also helps them to protect biodiversity.
Our role in protecting biodiversity
ING aims to help clients to limit their potential negative impact on biodiversity. This makes good business sense, as it results in lower financial risk for the clients as well as for ING’s portfolio. Therefore we identify risks, assess companies and deals based on those risks and decide how to go forward.
Sometimes this means we say no to clients, because we apply strict ethical and environmental criteria in our financing and investment decisions. To avoid negative impact on high-value ecosystems, we do not finance projects with direct impacts on UNESCO heritage sites or Ramsar wetland sites. On top of that, we do not finance projects with direct impacts on critical natural habitats registered by the International Union for the Conservation of Nature (IUCN), Category I (strict nature reserve & wilderness area) and Category II (national park). These restrictions apply to transaction assessments during credit approval.
We’ve also excluded certain economic activities that are incompatible with our concern for nature and aim to align portfolios with global climate goals. For instance we fully exclude commercial whaling, shark finning, Arctic offshore oil and gas exploration and production and new thermal coal-fired power plants. More excluded activities can be found in our ESR policy framework. Our screening criteria also include enhanced due diligence for transactions that can impact rich biodiversity areas and ecosystems. Furthermore, to acknowledge the increased biodiversity risks within some sectors, the ESR framework contains specific due diligence requirements for the sectors chemicals, energy, forestry and agriculture (including soy and palm oil), manufacturing, metals and mining, and infrastructure.
An evolving business opportunity area
With the measures above, we aim to avoid negative impact and minimise the impact that we cannot avoid. ING also aims to help clients become a driver for positive change and sees biodiversity as an evolving business opportunity. We’ve already developed a range of sustainability products and services, including green loans and green bonds. Our sustainability improvement loan rewards clients for their sustainability performance, bringing positive change for nature and ecosystems, but also for climate.
With these products and services, we look for opportunities for positive impact. For instance, ING supports clients and projects in areas of sustainable water management and climate adaptation. In 2020, we recorded €117 million in such projects. When we finance projects with environmental benefits we also consider biodiversity. For example, we check whether projects involving wind and solar parks cross any migratory bird corridors.
We will analyse our portfolio on impacts and dependencies
To better manage biodiversity-related risks and to further develop the biodiversity-related business opportunities, we need to increase our understanding of the impacts and dependencies on nature and biodiversity in our portfolio. That’s why we will analyse our lending portfolio on biodiversity-related criteria, starting with the sectors that carry increased biodiversity risks. Methodologies to do so are in their early stages. Therefore ING has taken a pioneering role participating in the development of the ENCORE biodiversity module, which has been launched by the Natural Capital Finance Alliance. This tool enables banks and investors to explore impacts and dependencies as well as potential alignment of their financial activities with a nature-positive future. This is an important step in the journey to restore biodiversity.
Partnerships and initiatives
ING continues to advance our understanding of biodiversity and how to best manage both negative and positive impacts. We are an active member of the finance workstream of the EU Business@Biodiversity platform, which is an EU-led initiative that aims to support financial institutions in integrating biodiversity risks and opportunities. We are also part of the Taskforce Nature Related Financial Disclosures (TNFD) network to contribute to a framework for corporates and financial institutions to assess, manage and report on their dependencies and impacts on nature.
We are pleased to actively contribute to the journey of the financial industry to understand its impact on nature and the way financial activities can contribute to the protection and restoration of biodiversity and ecosystems. By doing so, we help to create a healthy world with prosperous businesses and people.
Governments are recognising the importance of biodiversity. The United Nations is organising a Biodiversity Conference (known as the COP15 Convention on Biological Diversity) in October 2021 in Kunming, China. The goal is to adopt a global biodiversity framework. This framework is of crucial importance as it will set the global biodiversity course that countries, businesses and financial institutions are expected to contribute to.