The Steel Climate-Aligned Finance Working Group has been formed in order to define common standards for measuring progress on climate targets and proactively support decarbonisation in the steel industry. Lead by ING, the working group functions as part of the World Economic Forum’s Mission Possible platform and consists of leading lenders to the sector, including Citi, Goldman Sachs, Société Générale, Standard Chartered, and UniCredit.
While there are expectations that financial institutions should support the decarbonisation of the steel industry, it was stated that practical tools are lacking to do this effectively. The Steel Climate-Aligned Finance Working Group aims to set best practice for financial institutions in order to help achieve net-zero steelmaking by 2050.
Many industries have low-carbon technologies, but the steel sector, which emits roughly 7% of global energy emissions and is heavily dependent on coal, is said to currently lack commercially viable alternatives.
The group plans to draft a climate-aligned finance agreement for the sector (including scope, emissions pathways, methodologies and governance structures) based on the knowledge of each bank’s senior metals and mining team representative.
The agreement will be modelled after a similar one which took place in the maritime shipping industry: Poseiden Principles, reportedly the first climate-aligned finance agreement at the time of its July 2019 launch. This agreement has grown in support by $75 billion since its inception.
The Steel Climate-Aligned Finance Working Group will invite more banks to join in the final climate alignment at its debut, the 26th UN Climate Change Conference of the Parties (COP26) in November 2021.
“The challenge for the steel sector to decarbonise is significant, with alternative technology paths unproven and not yet commercialised,” stated Arnout van Heukelem, global head of Metals, Mining and Fertilizers at ING. “By leading this working group, we signal our commitment to help define what the energy transition means for the sector and our clients. It will also help us to define our expectations for change and define an ambitious yet realistic trajectory to meet those ambitions.”