Terra approach

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Climate change is an enormous threat to our world, there’s no doubt about that. In the Paris Climate Agreement, governments committed to take action to remain well below a two-degree rise in global temperatures compared to pre-industrial levels. Now, everyone has a role to play to make that happen.

As a bank, ING makes the most impact through our financing, via the money we loan to companies. We have a loan book of over €600 billion euros (as at 30 September 2018) across many sectors, which we will now begin steering towards meeting the Paris Agreement’s two-degree goal.

We’re able to start doing this by co-creating an innovative, accurate way to measure our portfolio, called the Terra approach. With this, we’re the first bank to commit to using science-based scenarios to steer our business strategy.

What is Terra about?

The Terra approach looks at the technology shift that’s needed across certain sectors to keep the rise of global temperatures to well below two degrees Celsius. In the automotive sector, for example, it’s not enough to lower emissions by making fewer petrol-powered cars – more electric cars must be made, too.

Terra then measures that needed shift in technology against the actual technology clients are using today and planning on using in the future. This is where financing comes in – and where ING can have an impact.

Terra works in such a way that it doesn’t only tell us what needs to shift, but how much and by when.

What sectors are looked at?

Terra focuses on the sectors responsible for most greenhouse gas emissions: energy (oil & gas, renewables and conventional power), automotive, shipping & aviation, steel, cement, residential mortgages and commercial real estate.

How does Terra work?

Detailed scenarios for each sector are developed by independent organisations like the International Energy Agency.

An IT tool compares the data from the sector scenarios to data on the technology our clients are using today and planning on using in the future.

This client data comes from global databases that track public and private companies of various sizes around the world, in the sectors with the biggest influence on greenhouse gas emissions. This makes it easy for clients, as they aren’t required to provide any data themselves.

Each sector requires a custom approach, which is ultimately what will make Terra so effective. For some sectors, the approach needs to be refined further, which we will work on with Terra co-creator 2˚ Investing Initiative, as well as ING’s different sector teams.

What is the 2˚ Investing Initiative and why is ING working with them?

The 2˚Investing Initiative is (2°ii) is the leading global think tank on developing climate and long-term risk metrics and related policy options in financial markets. 2°ii coordinates the world’s largest research projects on climate metrics in financial markets, with over 40 research partners in the public, private and philanthropic sector, and over millions re-granted to research partners to date. It’s backed by bodies including the European Commission and various European governments, and supported by academics, expert groups and civil society.

Why is Terra so important?

We feel it can change the way banks think about the energy transition. Compared to other measurement approaches, this one is precise, forward-looking, and will ultimately have a bigger impact because it steers key sectors towards technologies that underpin a low-carbon future rather than only measure a carbon-rich past.

What’s the next step?

We are speaking with other banks and stakeholders, together with the 2˚ Investing Initiative, to explain the methodology. Most banks we speak to are positive about the methodology and recognise the significant progress ING is making. All banks would benefit from having an industry-wide standard, increasing transparency and therefore our collective effectiveness in fighting climate change.

What else do we do on climate?

The Terra approach complements the other ways we are working to combat climate change. For example, our commitment to reduce our coal exposure to close to zero by 2025, and the way our sustainable improvement loan rewards companies for their sustainability performance.

We’ve financed billions of euros of wind farms, solar energy, and geothermal power production. In fact, we aim to double our Climate Finance portfolio by 2022 compared to 2017. Read more on our stance on climate.

Want to get involved?

Contact us at sustainability@ing.com

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