Terra approach

With Terra, we measure the emissions associated with clients active in the most carbon-intensive parts of the sector value chains, and use this information to benchmark our clients’ activities against the relevant science-based decarbonisation scenarios. Additionally, by measuring the absolute financed emissions of our portfolio, we perform hotspot analyses to monitor our loan book, identify risks and opportunities, and define next steps for expansion of Terra's scope.

Within Terra, we apply what we consider to be the best-fit methodology per sector to measure and steer our loan book. The methodologies we use concentrate on the part of the value chain which accounts for the bulk of the impact on the climate system, and on which decarbonisation efforts must be concentrated to spur the entire sector to fall into alignment. The specific boundaries of the activities that we cover per sector are defined by the methodologies adopted and the available scientific scenarios.

The sectors already in scope of Terra are power generation, oil & gas, automotive, aviation, shipping, cement, steel, commercial real estate and residential real estate, and the transition plans for those sectors are disclosed in our annual report. According to the International Energy Agency (World Economic Outlook 2024), these sectors account for over 75% of global CO2 emissions. We continue to explore how to expand our decarbonisation approach to new sectors – for example, last year we began to incorporate the aluminium and dairy sectors into Terra.

Our progress

For the latest information on the Terra sectors please see our annual report. The latest report shows that four sectors (power generation, upstream oil & gas, automotive and shipping) are on track to meet their 2030 climate goals. For other sectors in scope, we foresee challenges with bringing our portfolios into alignment with the relevant science-based pathways. These challenges range from the long lead-time in scaling new technology solutions in sectors like cement and steel, to the lack of mainstream low-carbon fuel alternatives in aviation and shipping, to insufficient government guidance and incentives to influence customer behaviour in residential real estate. These challenges would be greatly reduced by concerted action by industries, governments and regulators.

Methodologies

ING’s Terra approach makes use of various methodologies. We co-created Terra in 2018 with the 2˚ Investing Initiative (2DII), a global think tank developing climate metrics in financial markets. At that point in time, the main methodology used to set targets was the Paris Agreement Capital Transition Assessment (PACTA) for Banks. It looks at the technology shift that’s needed across certain sectors to slow global warming and then measures this against the actual technology clients are using – or plan on using in the future.

In the automotive sector, for example, we measure the current mix of our clients’ production of internal combustion engine vehicles compared to zero-emission vehicles and how clients plan to shift this balance over time. We can then compare this with what science-based transition pathways indicate for the automotive sector in order to reach the net-zero by 2050 goal. The analysis doesn’t only tell us what needs to shift, but also how much and by when. This is where financing comes in – and where ING can have an impact.

After launching the first Terra report using the PACTA methodology in 2021, we've continued to improve and expand Terra in collaboration with 2DII, also involving new partners like RMI's Center for Climate Aligned Finance (CCAF) (see Collaboration below). Improvements include expanding the geographies covered, bringing more sectors into scope, and adding more parts of the value chains within sectors.

Please see our annual report for more information the methodologies used.

One of the key challenges in our Terra steering work continues to be that of data management and access to good quality data, specifically in a sector like residential real estate. For this reason, it is important to stay close to data vendors, and do our quality controls when we receive data. We continue to prioritise this area, working to make progress on our risk and control framework, and how we interact with data vendors.

Collaboration

Collaboration and partnerships are essential parts of our approach to climate action, as no sector or company can solve the world’s problems alone.

We joined RMI's Center for Climate-Aligned Finance as a strategic partner in July 2022. Together with other financiers, we work to establish measurement methodologies, emissions data and reporting frameworks, and governance structures, which are necessary for financial institutions to support the transition to net-zero emissions.

Building on our involvement as a founding signatory of the Poseidon Principles for the shipping sector, we led a working group to design a climate-aligned methodology for steel, and we're proud to be one of six banks that are founding signatories of the Sustainable STEEL Principles. This will help banks measure and report the emissions associated with their steel loan portfolios compared to net-zero emissions pathways. We also had a lead role in the climate alignment working group for aluminium and helped develop the Sustainable Aluminum Finance Framework at the end of 2023.

See more info in 'How we engage'.

Policy makers

While we accept the role we play in financing and facilitating our clients’ transition to net zero, a massive joint effort is required for the world to actually reach net zero by 2050. We call on governments to direct and guide the changes needed to reach net zero by 2050, whether by regulation, policy or incentives.