No time to read the full 101-page 2022 Climate Report? Don’t worry. The main message is that we’re making progress, but we’re not perfect. As our CEO Steven van Rijswijk said: “We’re proud of the steps we’re taking, and the transparency with which we share the progress towards our targets. But none of us can do this alone. We all have a part to play, and we can all do much more. Let’s do it together, before it’s too late.”
Here are the main points from the report:
1. It covers all aspects of our climate action approach.
The report provides details on our integrated approach to climate action. It outlines how our financing impacts climate change, including steering our loan book towards global climate goals, providing green financing and advice to clients and reaching net zero in our own operations. It also addresses how climate change impacts our business, as we work to assess the risks in our portfolio and take action to mitigate them.
2. We’re using more ambitious climate pathways.
When it comes to aligning our portfolio with global climate goals, which we call our Terra approach, we’re using updated climate pathways that reach net zero by 2050 rather than 2070. We’ve updated this for eight of the nine most carbon-intensive sectors covered by Terra so far. The remaining sector, shipping, will follow as soon as a net-zero pathway is adopted under what’s known as the Poseidon Principles. (Think of the pathway like a roadmap, showing the route a sector needs to follow in order to decarbonise on time.)
3. We set intermediate targets.
The year 2050 is a long way away. It’s important to have earlier targets so that we know we’re on the right track and we can engage with clients on their shorter-term plans. So we’ve added 2030 targets for all nine sectors. (Check the report to see what they are.)
4. Most sectors are currently on track to meet climate goals.
Of the nine sectors currently in scope for Terra, five are on track: power generation, upstream oil & gas, automotive, commercial real estate and shipping. Cement and residential real estate are within 5% of their pathway and steel is just above 5% of its pathway. Aviation comes out well out of alignment due to the extraordinary impact that Covid-19 has had on the sector, although it is beginning to trend back to its decarbonisation pathway as the sector recovers.
5. We’re working to expand our Terra approach.
Terra now covers the nine sectors in our portfolio with the biggest carbon impact (see the answer above for which ones). We’ll continue to expand to include more sectors (like aluminium) and more parts of existing sectors. We’ll also keep taking a leading role in developing and adopting tools that can support us and the banking sector in transitioning towards net zero. For example, we are co-leading working groups in the steel and aluminium sectors that are creating pathways and principles to support those sectors’ transition to net zero.
6. Climate risk is an integral part of our approach to climate action.
Some recent achievements include creating extensive heat maps to globally assess climate-related and environmental risks and their impact on specific sectors. We assessed the impact of physical risk events on our global mortgage portfolio and updated our credit risk policy with specific requirements for climate-related and environmental risks.
7. We take action to protect biodiversity.
We also work to link biodiversity (and human rights and circular economy) to our integrated climate approach. Connecting sustainable finance directly to biodiversity protection and restoration is not common in the financial market, and we’re proud to do pioneering work in this area. A biodiversity hot-spot analysis was conducted in 2021 to improve our understanding of how the drivers of biodiversity loss relate to our lending portfolio. We also contribute to the development of the TNFD framework (Taskforce on Nature-related Financial Disclosure), which will form the foundation for how companies manage biodiversity and nature-related risks.
8. We updated our governance structure to reflect the importance of sustainability.
Our global head of Sustainability now reports to our CEO, and a Supervisory Board committee was set up to oversee the topic and monitor and advise on dilemmas.
9. It’s a work in progress.
The world looks different now than in 2021, with the war in Ukraine, inflation and high energy prices. Everything that is happening in the world around us makes us even more determined to reach our goals and become a banking leader in building a sustainable future for our customers, society and the environment.
10. We can’t do it alone.
While we accept the important role we must play in financing and facilitating our clients’ transition to net zero, actually reaching net zero by 2050 requires a massive joint effort. We call for urgent action on climate change. Governments must lead the way and companies must ultimately make the changes.