New ING policy could spark bank shift away from financing oil and gas infrastructure
A year after Dutch bank ING announced it would no longer finance new upstream oil and gas projects, today it published a new policy to also exclude financing for ‘midstream’ projects, including pipelines and terminals, that would unlock new oil and gas fields.
Maaike Beenes, Campaign Lead Banks & Climate at BankTrack, says: “This move from ING acknowledges that it makes no sense to end direct finance for oil and gas exploration projects while continuing to fund the infrastructure that transports this oil and gas. Although important gaps remain, ING could once more set in motion a positive shift in bank financing for the fossil fuel industry if this example is followed by other banks.”
The new policy means ING further restricts financing for new oil and gas, in line with the conclusion of the International Energy Agency that there is no need for new fossil fuel supply in its 1.5 degree-aligned net zero pathway. ING also announced it will adopt a net zero methodology for midstream activities by the end of the year; a significant step forward as the climate targets so far focussed only on upstream oil and gas. It is also the first major bank to commit to set targets for traded oil and gas by 2024.
The new policy puts ING at the front of the pack on restricting finance for oil and gas infrastructure. Société Générale excludes all new or significant expansions of LNG terminals in North America. HSBC recently announced a similar policy excluding new oil and gas fields and related infrastructure. However, ING so far has not addressed general corporate finance for companies expanding fossil fuels, whereas HSBC committed to assess its oil and gas clients’ transition plans against specified criteria including expansion.
Limitation to new fields significantly reduces impact
The new exclusion still leaves substantial parts of ING’s oil and gas financing unaddressed. First, it only applies to midstream projects “that unlock new oil and gas fields”. This means that the bank can still finance new pipeline infrastructure for existing fields, including where this helps expand oil and gas production. The bank can also still finance new or expanding liquid natural gas infrastructure linked to existing fields.
As such, ING is not fully aligning with another important conclusion of the IEA, namely that “given the rapid decline of fossil fuels, significant investment in new oil and gas pipelines are not needed in the NZE”. Similarly, in an October 2022 meta-analysis of 1.5C aligned net zero scenarios including those of the IEA, the International Institute for Sustainable Development showed that “there is no room for new fossil import infrastructure in Europe in 1.5°C-aligned gas phase-out pathways”, and that Europe’s current capacity is sufficient for projected import needs after 2023.
This is significant as the majority of ING’s oil and gas project finance is in fact for midstream projects linked to existing oil and gas fields. ING confirmed to Reuters that only around 10% of its midstream oil and gas lending in 2022 was linked to new oil and gas fields.
For example, as recently as March 13, ING was one of the lead banks providing a project finance loan for Venture Global’s Plaquemines LNG facility in the US. And in February this year, ING supported the controversial Bulgaria-Serbia Interconnector Gas Pipeline, part of the Southern Gas Corridor which will increase gas imports into Europe from authoritarian Azerbaijan.
ING’s financing for expansion companies will continue for now
The new policy also does not introduce new restrictions on general corporate lending to companies involved in upstream oil and gas or related infrastructure. In addition to supporting infrastructure projects directly, ING has financed the companies behind the recent LNG boom. For example, it provided US$ 180 million and US$ 430 million respectively to Cheniere and Venture Global, two companies that play a major role in the expansion of LNG export capacity in the US. Overall, ING provided US$ 94 million to companies expanding fossil fuel production and infrastructure in 2021.
BankTrack’s Maaike Beenes continued: “ING talks of balancing decarbonisation with energy security and affordability. Yet until the bank ends support for oil and gas companies that are locking our societies into fossil fuel dependency, it is risking both long term energy security and affordability”.
-
ING’s announcement says it will restrict “dedicated finance to ‘midstream’ (oil & gas infrastructure) activities that unlock new oil and gas fields”. ING further states that by the end of 2023 it will “adopt a ‘net zero by 2050’-aligned methodology for midstream oil and gas infrastructure such as pipelines, liquified natural gas terminals and storage facilities”. Finally, it commits to set targets in 2024 to “reduce the combined volume of traded oil and gas” it finances. It intends to apply the same 19% by 2030 reduction target it has committed to for its upstream lending to oil and gas trading based on volumes financed, but still needs to develop a methodology to implement this intention.
-
Recent research from end 2022 by BankTrack and Dutch data journalism platform Pointer shows that since the 2015 Paris climate agreement, ING has become the 3d largest financier of LNG terminals in the US. The bank provided over US$ 7 billion in project finance for seven existing terminals and for two that are currently under construction.