ING is lone too-big-to-fail bank in test-run for new CO2 metric

ING Groep takes the lead in validating climate commitments amid growing scrutiny of finance industry standards.

ING Groep NV has emerged as the only global systemically important bank to agree to test a new framework for ensuring that climate claims made by the finance industry are actually credible.

The biggest bank in the Netherlands is part of a program launched by the Science Based Targets initiative, which has been seeking volunteers since July. The goal is to test new standards designed to offer the first clear pathway for what banks, insurers and asset managers must do to get their long-term net zero plans validated. Focus is on so-called Scope 3 emissions, namely those incurred by clients and suppliers.

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The framework “will play a crucial role in shaping the verification and monitoring of Scope 3 emissions, with its clear guidelines and standards for the measurement and reporting of FIs’ indirect emissions,” said Paul Marushka, chief executive officer at Blackstone Inc.-owned Sphera, an ESG consulting and data company.

How the finance industry tackles Scope 3 emissions is a hotly debated topic, covering everything from the carbon footprint of clients issuing bonds underwritten by banks, to how loans are deployed by borrowers. Almost two-thirds of businesses don’t track such emissions, making it extremely hard for banks to compile their own client data.

Daan Wentholt, a spokesperson for ING, confirmed the bank’s participation in the SBTi program and said the goal is to “submit targets for validation soon.”

SBTi has had standards for near-term targets since 2020. Validation is voluntary and increasingly demanded by investors. Other too-big-to-fail banks have indicated they may consider applying the SBTi guidelines in the future and several are reviewing the draft, according to SBTi.

A Deutsche Bank AG spokesman said that once the final standard is published, the lender “will review its contents and consider our position.”

Elise Billard, head of climate strategy at Credit Agricole SA, said the bank has been working with SBTi for a few years, but its focus for now is on getting near-term targets validated to help ease its path onto a number of ESG indexes.

SBTi’s efforts to move ahead with its test follow a turbulent period for the climate group. Earlier this year, it found itself the target of criticism after appearing to endorse the use of carbon credits — instruments regularly criticized as tools of greenwashing — to offset Scope 3 emissions.

SBTi has since stated that its standards have remained consistent throughout.

Credit Agricole, which wrote to SBTi to express its opposition to carbon credits, was “relieved” when the group clarified its position, Billard said in an interview. SBTi validation “is really important” to the bank, as the organization is “well known” and “is really reliable.”

ING’s Wentholt said the bank is “still very much committed to SBTi.”

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Voluntary certification programs like SBTi have faced greater scrutiny as their services become intertwined with global efforts to slash greenhouse gas emissions. Many self-appointed gatekeepers don’t disclose how they score companies, according to new research led by Luca Enriques, a professor of corporate law at the University of Oxford, which called for regulation of the industry.

ING, which said last week it won’t finance new liquid natural gas terminals after 2025, is among almost 40 financial institutions working their way through the new SBTi guidelines.

A long time in the making, the instructions are SBTi’s most comprehensive to date for the finance industry, including the first 1.5C alignment targets, capital markets activities and requirements that institutions have policies to address deforestation and stop financing oil and gas projects.

The standards also require financial institutions to prioritize high-emitting customers and allow for selective use of other organizations’ approaches. Nate Aden, head of financial standards for SBTi, said it’s an imperative to “increase the interoperability of our work and our standards with our peers.”

SBTi is also addressing a “misunderstanding” that divesting assets ensures validation, Aden said. The organization is instead advising financial institutions to “invest in the transition and solutions” and “increase that investment.”

The SBTi consultation runs through September, after which the group plans to make changes to incorporate feedback before publication of the final standards in 2025.

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