NEWS

14 09, 2018

Media statement: ING reveals 2°C scenario analysis method for corporate lending portfolios

Today ING announced that it will start steering its €500 billion lending portfolio towards meeting the climate goals of the Paris Agreement after developing a cutting-edge, precise method to do this with the 2˚ Investing Initiative (2˚ii). The Paris Agreement aims to keep global warming as a result of climate change to two degrees Celsius or below.

ING had been working for several years to figure out the best way to measure the climate impact of its lending portfolio. After piloting a financed-emissions approach that ultimately could not be used, ING sought alternative methods for measuring and steering.

In early 2018, ING partnered with 2˚ii to extend the initiative’s existing 2°C scenario analysis framework for equity and bond portfolios – the so-called Paris Agreement Capital Transition Assessment or PACTA tool – to corporate lending portfolios. As a result, 2˚ii and ING have together taken the lead and successfully developed a methodology that could become the standard for how international banks set science-based targets. ING calls this the Terra approach.

“We are delighted that a multinational bank such as ING helped us pioneer this methodology for financial service providers,” said Jakob Thomä, managing director of 2˚ii. “The methodology – and its resulting 2˚C-aligned portfolios – will be an important contributor to combating climate change. We hope other banks will follow suit and adopt it as well.”

Compared to other measurement approaches, this science-based approach could ultimately have a significant impact because it enables banks to direct their money towards financing technologies that support a low-carbon future instead of those that only measure a carbon-rich past.

The approach focuses on the sectors that produce the most greenhouse gas emissions. It also concentrates on the technology changes that companies in those sectors need to make in order to be aligned with the climate goals of the Paris Agreement. For example, it is not enough for automotive companies to lower emissions by producing fewer petrol-powered cars – they have to manufacture more electric cars too.

“Banks have a responsibility to finance change and we are stepping up to that,” said Isabel Fernandez, head of ING Wholesale Banking, who will announce the Terra approach in her speech at the Global Climate Action Summit in San Francisco today. “We believe the Terra approach will enable us to make a real difference.”

Like the PACTA tool, the Terra approach is open-source. ING is collaborating with other banks and stakeholders to encourage them to also work with this methodology.

“All banks will benefit from having an industry-wide standard, greater transparency on their alignment with the climate goals of the Paris Agreement and, as a result, collective effectiveness in fighting climate change,” added Fernandez.

To learn more about the Terra approach, please contact sustainability@ing.com or contact@2degrees-investing.org

ENDS

For more information contact:
Marrika van Beilen
Media Relations
ING Group +31654257830
Marrika.van.beilen@ing.com

Nina Roehrbein
Head of Communications
2° Investing Initiative
comms@2degrees-investing.org

About ING
ING is a global financial institution with a strong European base, offering banking services through its operating company ING Bank. The purpose of ING Bank is to empower people to stay one step ahead in life and in business. ING Bank’s more than 52,000 employees offer retail and wholesale banking services to customers in over 40 countries. ING Group shares are listed on the exchanges of Amsterdam (INGA AS, INGA.AS), Brussels and New York Stock (ADRs: ING US, ING.N). Sustainability forms an integral part of ING’s strategy, which is reflected in ING’s ranking as a leader in the banks industry group by Sustainalytics. ING Group shares are included in the FTSE4Good Index and in the Dow Jones Sustainability Index (Europe and World), where ING is also among the leaders in the banks industry group.

About 2°ii
The 2° Investing Initiative (2°ii) was set up in 2012 with the mission to align financial markets with climate goals. It has since become a pioneering think tank – with offices in Berlin, Paris, London and New York – on the integration of long-term risks and policy objectives into financial markets and regulatory frameworks. Over the past few years, 2°ii has led one of the largest global research programmes on long-term risks in financial markets, working with over 50 research partners. A core principle of its mission is to reduce the transaction costs across companies, financial institutions and policymakers, while guiding financial markets towards the long-term future.

3 09, 2018

Launch of first online & free climate scenario-based analysis tool

The PRI, together with California Insurance Commissioner Dave Jones, is pleased to support the launch of a free-to-use, online tool – developed by the 2⁰ Investing Initiative – for assessing climate transition risk in investor portfolios.

This tool, the Paris Agreement Capital Transition Assessment or PACTA tool, analyses exposure to transition risk in equity and fixed income portfolios over multiple scenarios, thereby helping to reduce information barriers on how climate scenario analysis can be done.

Most significantly, the tool allows investors to see the gap between their existing portfolio and two-degree benchmarks. An earlier version has been used by over 250 investors – many of whom are PRI signatories – and four regulators, including the Swiss financial regulator, the California Insurance Commission and the Dutch Central Bank.

The tool offers a solution to a number of existing barriers, notably:

  • The tool, and the database behind it, is a solution to the problem of where investors can obtain data in the event that companies do not disclose information on their carbon emissions.
  • It represents the gap between a two-degree benchmark and investor portfolios and the graphs are adjustable by sector, region, type of climate reference scenario and other indicators. The tool can be downloaded in a 30-page output report, which is confidential to the user.

The launch of the tool supports the PRI’s ongoing commitment and its actions to help institutional investors transition to a low-carbon environment, including the alignment of the PRI Reporting Framework with the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). The recommendations provide a globally consistent framework to help translate non-financial information about climate change-related risks into financial metrics.

Incorporating the TCFD recommendations requires institutional investors to obtain better information if they are to navigate their way efficiently through the energy transition. A key TCFD recommendation is the need for forward-looking analysis to assess how investors’ exposure to climate change-related risks and opportunities might impact on portfolio performance over time. Questions, however, linger about how this approach can be implemented, consistently, by investors in practice.

Speaking about the launch of the tool, PRI CEO Fiona Reynolds said: “We are delighted to partner with the 2⁰ Investing Initiative on the launch of the PACTA tool. The PRI anticipates that this tool will help reduce information barriers for investors on how climate scenario analysis could be done. The launch of this tool, as well as solutions offered by other service providers, means there are even fewer reasons for investors not to get started.”

Stan Dupré, CEO and founder of the 2° Investing Initiative, said: “We developed the PACTA tool to enable investors to conduct climate change scenario-based analysis of their portfolios. It can help them comply with the TCFD recommendations, French Article 173 and the upcoming disclosure requirements at the EU level – at no cost. The PACTA tool also fosters comparability between portfolios in the absence of a reporting standard on metrics. This is what makes it attractive to financial supervisors, such as the California Department of Insurance, and governmental authorities, such as the Swiss Federal Office for the Environment. The PRI, with its 2,000 investor signatories, is critical to the deployment of the approach, which is why we are pleased to be partnering them in the online launch of the PACTA tool.”

Also commenting on the launch, David Jones, California Insurance Commissioner, said: “I congratulate the 2° Investing Initiative and the PRI on the launch of PACTA – the free-to-use, online scenario analysis tool. Recognising the uncertainty of the future policy and market pathway as it relates to the transition to a low-carbon economy, scenario analysis can highlight the extent to which a portfolio is exposed to this uncertain and associated risk, as well as the expected evolution to this exposure over time.

”We engaged the 2° Investing Initiative, an expert in climate-related financial risk and which has partnered with other financial regulators, to conduct this analysis for insurers operating in California with over US$100 million in annual premiums. One of the key aggregate results of the scenario analysis reinforced our earlier conclusion that thermal coal investments face long-term financial risks despite any short-term fluctuations in market price. In addition to publishing the aggregate data from this analysis, individual insurer reports were sent to over 100 insurance companies – by size of their investment portfolio – operating in California with more than US$100 million in annual premiums, which we believe will help these companies better evaluate their exposure to transition risks.”

Jean-Francois Coppenolle, Senior Manager at Aviva Capital, Aviva Insurance, said: “As investors like us take stock of the climate change-related risk and opportunities from companies we invest in, with regard to equities as well as corporate bonds, the open-source PACTA tool not only helps us understand how aligned we are with the global climate goals today but also provides a five-year trajectory. This informs us of how the investment decisions we make today will contribute to, or detract from, our ambition to steer the change required for a low-carbon and more sustainable future.”

A webinar on the PACTA tool – set to take place in October – will be announced in due course.

 

 

 

 

 

 

 

 

 

ENDS

For more information contact:
Joy Frascinella
Head of PRI
The Principles for Responsible Investment (PRI)
00 44 (0)203 714 3143
Joy.frascinella@unpri.org

Nina Roehrbein
Head of Communications
2° Investing Initiative
Nina@2degrees-investing.org

About the PRI
The United Nations-supported Principles for Responsible Investment (PRI) Initiative is an international network of investors working together to put the six principles for responsible investment into practice. Its goal is to understand the implications of Environmental, Social and Governance issues (ESG) for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. In implementing the principles, signatories contribute to the development of a more sustainable global financial system. There are currently more than 1,900 signatories to the PRI which collectively manage over US$80 trillion in assets. Visit www.unpri.org

About 2°ii
The 2° Investing Initiative (2°ii) was set up in 2012 with the mission to align financial markets with climate goals. It has since become a pioneering think tank – with offices in Berlin, Paris, London and New York – on the integration of long-term risks and policy objectives into financial markets and regulatory frameworks. Over the past few years, 2°ii has led one of the largest global research programmes on long-term risks in financial markets, working with over 50 research partners. A core principle of its mission is to reduce the transaction costs across companies, financial institutions and policymakers, while guiding financial markets towards the long-term future.

 

23 10, 2017

Out of the Fog: Quantifiying the alignment of Swiss pension funds and insurances with the Paris Agreement

October 2017: Our latest report of the PACTA project  “Out of the Fog: Quantifiying the alignment of Swiss pension funds and insurances with the Paris Agreement” analyses Swiss pension funds and insurances and was done in cooperation with the Swiss Federal Office for the Environment (FOEN) and the State Secretariat for International Financial Matters (SIF).

12 06, 2017

Lighting the way to best practice – Climate reporting case studies

May 12th, 2017: The guide  “Lighting the way to best practice” gives an overview of the best practices in applying the Article 173-VI of the Energy Transition for Green Growth Law. (more…)

12 06, 2017

California Senate Public Employment and Retirement Committee passed Senate bill 560

Apr. 25 2017 – On April 25th,  the California Senate Public Employment and Retirement Committee passed Senate bill 560 (SB -560) requesting CalPERS and CalSTRS, the two largest public pension funds in the US, (more…)

12 06, 2017

Launch of Asset-level Data Initiative (ADI)

Apr. 07 2017 – Oxford University Sustainable Finance Program, 2°ii, CDP, and Stanford University were  jointly launching the Asset-Level Data Initiative (ADI) (Link). ADI is non-commercial research-based initiative to support the bringing together of existing asset-level data with new sources of data.  (more…)

12 06, 2017

Invitation: 2nd webinar introducing the new ISO Standard on climate and the finance sector

Mar. 23th 2017 – 2° Investing Initiative invited those that missed the first webinar on ISO 14097 (Link) to a second introductory webinar, which took place on Thursday, March 23th at 6pm EDT (March 24th at 9am AEDT). (more…)
12 06, 2017

Invitation: Exploring the “Tragedy of the Horizon” – Discussions in New York and London

Feb. 23rd 2017/Mar. 3rd 2017 – 2° Investing Initiative, Mercer, Morgan Stanley, S&P Global Ratings, and The Generation Foundation invited to the launch of two new ‘Tragedy of the Horizon‘ reports in New York (Feb. 23rd 2017) and London (March 3rd).  (more…)

12 06, 2017

Invitation: Asset-level data and climate-related risk panel

Feb. 28th 2017/Mar. 6th 2017 – 2° Investing Initiative, BlackRock Climate Solutions and Jupiter Asset Management invited to the launch of the report “Asset-level data and climate-related risk” and interactive discussion on how detailed market intelligence data sources can be used for ESG and climate-related risk assessment. (more…)

12 06, 2017

2ii launches ISO standard in partnership with UNFCCC & AFNOR

Feb. 8th 2017 –  On behalf of International Standard Organisation (ISO) and the French Standard Organisation (AFNOR), 2 Degrees Investing Initiative invited to the kick-off meeting of the new ISO Standard on climate and the finance sector: ISO 14097. (more…)