Lenders to the global steel industry are developing a climate-driven finance agreement to support the decarbonization of the sector.
Banks including Citi, Goldman Sachs, ING, Societe Generale, Standard Chartered, and UniCredit have teamed up to form the Steel Climate-Aligned Finance Working Group, they announced late last week.
The group has developed a set of ‘action standards’ specifically for the steel sector. These will assess whether greenhouse gas emissions associated with a financial institution’s portfolio are in line with the Paris Agreement climate target of keeping the average global temperature rise below 1.5˚C compared to pre-industrial levels.
The working group plans to craft an agreement, backed by industry, prior to the UN Climate Change Conference (COP26) in in Glasgow, Scotland in November 2021.
The agreement will be modelled on the Poseidon Principles, a set of climate-aligned finance principles designed for the shipping industry. This was the first global sector-specific framework for incorporating climate considerations, and was launched in June 2019 by a working group that also included Citi and Societe Generale.
Arnout Van Heukelem, global head of metals, mining and fertilizers at ING Bank, said: “Steel is essential for modern life. The challenge for the steel sector to decarbonize is significant, with alternative technology paths unproven and not yet commercialized.
“By leading this working group we signal our commitment to help define what the energy transition means for the sector and our clients.”
This set of standards could relinquish some of the unease surrounding how exactly to measure progress against climate targets in the steel sector.
The amount of carbon emitted from the steel industry is almost double the amount of steel created: 1.85 tonnes of carbon per one tonne of steel, according to CleanCarbon.
Stephanie Clement de Givry, global head of mining, metals and industries at Societe Generale, said the banks hoped to “help define a pathway consistent with the development of low-carbon industrial solutions in the steel sector”.