Dutch bank ING urges policy shift to help it hit climate targets

By Simon Jessop and Tommy Wilkes

LONDON (Reuters) - Governments must set tougher rules to aid the decarbonisation of real estate and other sectors, ING's CEO said, warning that the Dutch bank will otherwise struggle to hit its climate targets.

The Netherlands' biggest bank, with a market capitalisation of some $48 billion, is among a growing number of lenders vowing to cut climate-damaging emissions tied to their financing.

ING Chief Executive Steven van Rijswijk told Reuters that governments in markets where it offers residential mortgages - Belgium, the Netherlands, Germany, Poland, Spain and Australia - could help lower related emissions by moving power grids to renewable energy.

Several banks have called for more policy support to push through change amid criticism from climate groups that they are moving too slowly, such as financing new fossil fuel production.

While ING showed year-on-year improvement across sectors in 2022 ,including power generation and steel, emissions from residential real estate, which make up most of its loans, were 5.8% above the necessary pathway, compared with 3.2% a year earlier.

Improving the energy efficiency of homes, including having a discussion about subsidies to help owners switch to heat pumps, was crucial, as was the need for better data and clearer, consistent labelling across countries, van Rijswijk said.

"In some countries there are not even labels, in some countries there are labels but they don't measure what the energy intensity of that house really is," he added.

While ING could impose stricter rules on new lending, the bank believes its existing book of mortgage loans - more than 300 billion euros - requires government help to push homeowners to build or renovate their homes in a more sustainable way.

Take-up of sustainable housing products like green mortgages, while showing promise, was "still not at the level required to drive the transition", ING said. Residential real estate accounts for about 12% of ING's financed emissions.

Across other sectors, emissions from its power generation financing were now tracking 31.3% below the net-zero emissions pathway, compared with 23% below in the prior year.

Upstream oil and gas was 47.5% below compared with 15.2%; shipping was 2.8% below compared with 6% below; steel was 0.8% above from 5.4% above; cement was 3.9% above from 4.2% above; and aviation was 2.1% above from 57.3% above, it said.

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Van Rijswijk said the bank's preference was to work with companies to decarbonise, but ending relationships with laggards was sometimes necessary, citing the loss of "a number of Polish and German (coal) clients" since it first announced a phased exit from the thermal coal-fired power sector.

"There are some companies who don't want to do it (transition) and there we exit," he said.