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Energy crisis not impacting fossil fuel policies, net-zero plan – ING CEO


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Energy crisis not impacting fossil fuel policies, net-zero plan – ING CEO

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ING CEO Steven van Rijswijk.
Source: ING

➤ ING is "sticking to its guns" on the bank's net-zero plans and fossil fuel financing policies amid the current energy crisis.

➤ The bank will ultimately break ties with clients that do not transition in line with its own net-zero strategy.

➤ More collaboration between the public and private sectors is needed to drive the transition.

Europe's energy crisis has made banks' efforts to reach net-zero emissions by 2050 even more challenging. But Dutch lender ING Groep NV remains committed to its transition strategy, which includes withdrawing dedicated financing to new oil and gas fields and growing its sustainable financing offerings, according to CEO Steven van Rijswijk.

Speaking to S&P Global Market Intelligence in an on-stage interview at the Sibos conference in Amsterdam on Oct. 10, van Rijswijk said the energy crisis had not impacted the bank's decarbonization efforts or financing policies. The lender is seeking to support the energy transition "in an inclusive way," but will ultimately have to exit clients that do not progress, van Rijswijk said. The CEO also called for governments to take more action to support the transition and set clear targets.

The following is an edited excerpt from the conversation.

S&P Global Market Intelligence: ING has committed to net-zero emissions by 2050 and set interim targets for select portfolios. What have been the biggest challenges?

Steven van Rijswijk: We set a target for net zero for 2050, but 2050 is a long way away and that's why we said we also need to set intermediate targets. And for eight sectors, we set targets already for 2030, and for the remaining part of the portfolio, we will set targets next year.

The biggest challenge is to make sure we not only measure what the impact is on our portfolio, but that we also look at how we manage the impact. So with every loan, we now need to understand, if we make this loan, are we then increasing the [carbon] footprint or not? And what do we then do about it? And do we actually grant this loan or not?

In the end, we want to do it in an inclusive way, because if we realize our targets by 2030 by selling our portfolio in 2029, we haven't made an impact on the world. So we want to have these conversations with our customers on a day-by-day basis, to understand their policies, understand how we can help them with structuring or, for example, setting a sustainability-linked framework or maybe help them with a sustainability-linked loan or other way of capital raise. But we need to do it together and make sure we have a real impact so that we are not forcing ourselves at some point in time to become exclusive.

What happens if clients do not transition in line with your net-zero strategy? Will you stop working with them?

The short answer is, yes, in the end, we will. But like I said, if we have set ourselves targets for 2030, and if by 2029 we're so far off our targets that we would need to exit clients, that would be a big shame and that would mean that we wouldn't have realized that much.

What we have done, for example, with the coal sector in 2017, we have said to our customers that we will not provide any new project finance for the development of new coal fire power plants. And the energy mix, we want to make sure that the percentage of coal that they use for energy development will decrease over time to 50%, to 30%, and to less than 5% by 2025. And we said that we would work together with them, look at how that would be possible. But if they would not meet those yardsticks, then in the end we would exit that particular sector.

That was unfortunate, with a couple of clients, we had to do that. With the lion's share of most of our companies, we have been able to work on certain metrics. We want to do it as inclusively as we can, but if no progress is made, then we need to have a different type of conversation.

Is the energy crisis impacting your efforts to decarbonize your portfolio? Are you making any exceptions to policies in order to finance more fossil fuels, for example?

Until now, it doesn't. Clearly, there is an imminent energy crisis and everybody is looking at that. And it's also driving up energy prices for everybody in societies, and that is creating its own inflationary and economical environment. At the same time, we have our eyes on the longer-term horizon. The sustainability crisis, if you will, is a longer-term crisis.

The current energy crisis also gives additional impetus for societies to transition, to look at new technologies and different ways of working in the supply chain, working cross-sector and across countries. And it gives time for new technologies to thrive because sometimes, from an economical perspective, it is not so easy to do.

But we haven't changed our policy. We announced a number of months ago that we will not finance new oil and gas fields. We have announced that we would support total [sustainable] financing, capital market transactions of more than €125 billion [per annum] by 2025. That's a growth rate of around 10% per annum. And we try to stick as close as we can to our promise. And clearly, there are many uncertainties, but now is maybe even a better time to make sure that we transition in society. So we are sticking to our guns.

ING in its latest climate report emphasized that it cannot drive the transition alone, saying that governments must lead the way and companies must ultimately make the changes. What concrete action would you like to see from governments?

It starts with supporting collaboration between the private and the public sector. Let me give you an example. I just talked about emerging technologies, but with emerging technologies, it's hard for the banking sector to finance them given the capital requirements that we have for equity, for example. That means we need to get that equity or mezzanine equity from somewhere else. And governments can be a good bridge for those types of technologies that are not mature as yet, so that they can be economically viably employed.

The same collaboration is needed, for example, with transitioning households. If you look at our portfolio, 18% is mortgages. To help a private individual transition, it's not that easy, also given the high energy prices. If your house has a certain label and you need to transition, you need to buy solar panels or you need to buy heat pumps; that all costs money. So some form of collaboration and maybe even subsidy could be required.

The second one is setting clear targets. What do we want to focus on? For example, in the Netherlands, there is a debate on nuclear. There is a possibility to go to hydrogen, but that takes quite a lot of investment. In many countries, there are challenges in terms of whether there is the room or ability to put up wind parks, or to upgrade the grid. But to have clear guidance on what the targets are in the next five to 10 years is important.

And the third point, to make sure that we measure this consistently, is that we use the same taxonomy. Not only in the Netherlands, but on the European and preferably on a global level, to be able to transition in the same way and disclose our transition in the same way.