An upstream oil and gas phase-out date does not shield ING from climate lawsuits
Quentin Aubineau, Policy Analyst, Banks and Climate, BankTrack
Quentin Aubineau, Policy Analyst, Banks and Climate, BankTrack
In December 2023, ING announced a phase-out of its upstream oil and gas loan portfolio by 2040. The Dutch bank is now one of the first large commercial banks to have set a phase-out date for upstream (exploration and production) oil and gas financing. This announcement needs to be supported by concrete policy improvements and is still far from the scale and urgency of the action needed to stop the climate crisis. Yet we hope it inspires other banks to follow and bring the industry closer to realistic targets to fully end fossil fuel finance in line with the Paris Agreement goal of limiting climate change to 1.5ºC of warming.
BankTrack has been actively engaging with ING to address the impact of its oil and gas financing for many years, including through the publication of the Banking on Climate Chaos report, which consistently finds ING among the largest financiers of fossil fuels in the world. We also pointed out the limitations of ING’s last policy from March 2023 on midstream infrastructure, and helped to expose ING’s financing of Dodgy Deals like the expansion of LNG terminals in the US Gulf.
On December 20th, 2023, ING announced that by 2040, it will reduce to zero the financed emissions linked to its upstream oil and gas portfolio. According to the Dutch bank, “loans to upstream oil and gas activities will be reduced by 35% by 2030, which translates into a reduction of 50% absolute emissions financed linked to ING’s upstream portfolio (scope 1, 2, and 3)”.
Just a month later, on January 19th, 2024, Friends of the Earth Netherlands (Milieudefensie) initiated a legal action against ING, demanding that the bank aligns its climate policy with the 1.5ºC objective of the Paris Agreement, halves its total emissions and dissociates from fossil fuel clients with expansion plans. ING reacted saying that it takes “impactful action to fight climate change” and “will of course respond in court if necessary”.
BankTrack fully supports this lawsuit, and agrees with Milieudefensie that ING’s climate policy is not consistent with the 1.5ºC target of the Paris Agreement. The scope of the bank’s new policy is insufficient, as it does not prevent the bank from supporting fossil fuel companies with expansion plans that are incompatible with limiting climate change to 1.5ºC of warming.
Milieudefensie states that, to align with a 1.5ºC scenario, ING would need to reduce its total absolute scope 1, 2 and 3 greenhouse gas emissions “by at least 48% CO2 and at least 43% CO2e in 2030 compared to 2019” (1). This reduction must go well beyond the emissions of ING’s upstream portfolio, and should cover all of ING Group’s GHG emissions.
In addition to its new financed emissions targets, ING's new policy aims to triple its financing of renewable power generation by 2025 compared to 2022. The move makes ING the first bank to take note of the COP28’s UAE Consensus, which is calling for “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner” and take steps in line with that transition. Nonetheless, to reduce absolute emissions, financing for renewable power should go hand in hand with ending support for fossil fuel developers.
ING’s response to the lawsuit will show the real level of its climate ambition
Before this announcement, ING had already committed to no longer provide dedicated finance to new upstream oil and gas projects (exploration and extraction), nor midstream oil and gas infrastructure activities that “unlock new oil and gas fields”. But to phase out its upstream oil and gas exposure by 2040, as it has now committed to, ING will need to reduce to zero both project finance and corporate loans to upstream O&G clients. Yet, ING’s current policy is insufficient to achieve this objective.
On project finance, ING only excludes dedicated finance for new upstream oil and gas projects, but not for existing ones. If ING is serious about phasing out its upstream oil and gas portfolio, it can no longer provide project finance for the expansion of existing oil and gas fields.
On corporate finance, the situation is worse, as ING does not currently have any commitments regarding reducing its finance to upstream oil and gas companies. In its announcement of the new policy, ING claims to be “guided by the IEA’s 1.5ºC climate scenario”. This scenario explicitly states that “there is no need for investment in new coal, oil and natural gas”. Therefore, ING should immediately stop financing oil and gas companies that are developing upstream projects, both new fields and expansion of existing ones, as such companies are not aligned with the IEA’s Net-Zero Scenario and financing them would be incompatible with ING’s 2040 phase-out objective.
ING’s upstream oil and gas loan portfolio is the tip of the iceberg
Although ING’s announcement is a step in the right direction, even if it still must be confirmed with concrete policy improvement, the Dutch bank still fails to tackle crucial parts of its oil and gas financing.
Firstly, ING remains silent regarding the underwriting of bonds for upstream oil and gas companies. According to the Banking on Climate Chaos report 2023, (BOCC 2023) “underwriting bonds and equities accounted for 36% of all fossil fuel financing” in 2022. Therefore, it is crucial that ING includes bond underwriting activities in its plans to phase out its oil and gas exposure by 2040.
Secondly, ING’s current policy only covers the upstream part of the oil and gas value chain. As of now, ING’s only commitment regarding midstream oil and gas is to restrict dedicated finance to “midstream activities that unlock new oil and gas fields”. This is far from being sufficient as it does not cover midstream projects linked to existing oil and gas fields, nor finance for companies developing such projects. Yet, another finding from the BOCC 2023 is that fossil fuel “project-specific finance accounts for on average only about 4% of total finance annually”. Hence, ING must also restrict corporate finance to companies developing any new midstream oil and gas projects. In the same way, ING's recent commitment to no longer provide project finance for metallurgical coal mines should be expanded to corporate finance.
To conclude, ING’s new policy commitment is welcome, but the bank will be measured by the concrete commitments it makes to achieve these objectives. ING’s climate ambition will be insufficient until it finally takes steps to restrict all its finance, including bonds and corporate finance, for both upstream and midstream oil and gas companies that continue to expand the fossil fuel industry. Milieudefensie’s lawsuit delivers the message to banks that there is no time to steadily tune up their climate policies over the years; banks need to take bold action now to ensure they are in line with the 1.5 degrees Paris goal.
1. Milieudefensie, Notice of liability.