Originally published on RMI.org.
The world’s leading steel industry lenders – Citi, Goldman Sachs, ING, Société Générale, Standard Chartered and UniCredit – are working together to develop a climate-aligned financing deal to support decarbonization of the steel industry.
Several major steel lenders – Citi, Goldman Sachs, ING, Societe Generale, Standard Chartered and UniCredit – have come together to set common standards of action for decarbonizing the steel sector through an aligned crowdfunding agreement on the climate. A climate finance agreement establishes a framework for assessing and disclosing how well the greenhouse gas emissions associated with a financial institution’s portfolio are in line with climate targets of 1.5 ° C.
The banks formed the Steel Climate-Aligned Finance Task Force (the Task Force), facilitated by RMI’s Center for Climate-Aligned Finance, with the aim of crafting an industry-backed agreement ahead of the UN Conference. United Nations on Climate Change in November 2021 (COP26). The deal would create a level playing field for measuring progress against climate goals in the steel sector, as well as a platform to proactively support the decarbonization of the sector.
“ING aims to be a positive force in the fight against climate change. With our Terra approach, we orient our loan portfolio in line with the objectives of the Paris Agreement. Steel is essential to modern life. The challenge for the steel sector to decarbonize is significant with alternative technological paths that have not been proven and not yet commercialized. By leading this working group, we are signaling our commitment to help define what the energy transition means for the sector and our customers. It will also help us define our expectations for change and set an ambitious but realistic trajectory to meet those ambitions. –Arnout van Heukelem, Global Head of Metals, Mining and Fertilizers, ING Bank
Steel is the foundation of modern society: a material contribution to buildings, cars, railways, roads and bridges. Although low-carbon technologies exist in many industries, for the steel sector, which emits around 8% of global energy emissions and is heavily dependent on coal, commercially viable alternatives are still at an early stage. for industrial scale applications. In a business-as-usual scenario, emissions from the steel sector could reach 20% of the global 1.5 ° C carbon budget by 2050. The carbon intensity of the sector increases the expectations of financial institutions and of financial institutions to support its decarbonization, but to date, financial institutions lack common practical tools to effectively support the decarbonization efforts of their clients.
The working group, led by ING and co-led by Société Générale, is made up of senior representatives of the metals and mining teams of each bank. The working group will define the scope, emission pathways, methodologies and governance structure of the climate-aligned collective financing agreement in collaboration with existing decarbonization initiatives. With the aim of defining global climate best practices for financial institutions that finance steelmaking, the task force plans to involve other banks in the final climate-aligned finance agreement that will be published at COP26.
The RMI Center for Climate Aligned Finance (the Center) will facilitate engagement between the Task Force and the Net-Zero Steel Initiative (NZSI) to ensure that the goals of steelmakers and their lenders are aligned. “The formation of the steel finance working group is only the first step towards a climate aligned steel sector”, said James Mitchell, director of the Center. “Decarbonizing high-emitting sectors is a challenge, but collective action efforts such as the Poseidon Principles show how the financial sector can meet its climate goals by serving its industrial clients in sectors that are hard to reduce, such as steel. . Now the hard work really begins.
The deal will build on the principles of Poseidon, the first climate-aligned sector finance agreement for maritime transport. The Principles were launched in July 2019 with 11 bank signatories representing $ 100 billion – or 20% – of senior maritime debt and have since more than doubled to 24 signatories representing $ 175 billion by March 2021. Developed through a unprecedented multi-stakeholder collaboration between major shipping carriers. lenders, industrial companies and experts, the Principles pave the way for a similar framework in other sectors, such as steel.
This effort is part of the Mission Possible Partnership (MPP), an alliance of leading nonprofits and approximately 400+ companies working to accelerate industrial decarbonization in seven sectors, including steel. . Within the MPP, the working group is part of the NZSI, which includes some of the world’s largest steel producers and suppliers. By providing this crucial platform, the NZSI unites the policy, customer demand, industry goals and financial commitments behind the industry’s net-zero transition.
“As founding member of the UNEP-FI Net Zero Banking Alliance, Societe Generale is committed to supporting its customers and partners in all sectors to achieve net zero by 2050 at the latest. By co-leading the Steel Climate-Aligned Finance working group, our ambition is to help define a path consistent with the development of low-carbon industrial solutions in the steel sector. Steel is essential and Societe Generale is already supporting steelmakers in the implementation of breakthrough hydrogen technologies to produce low-carbon steels demonstrating the climate adaptation potential of this industry. With an appropriate framework, all banks will be able to support their clients in their innovations and investments for a low-carbon future. After the Principles of Poseidon for maritime transport, Societe Generale is proud to co-lead the creation of a climate-friendly financing agreement for another industry that is difficult to control.