2023: ING grows sustainable finance in muted markets

As a funder of the economy, banks play a role in supporting the transition to a net zero economy. Whether by funding ‘green’ activities like renewable energy, through innovative financing solutions, or by helping clients to transition towards a more sustainable business model. In 2023, ING mobilised €115 billion of financing – up from €101 billion the year before – that support our clients’ transition and we intend to grow this to €125 billion by 2025.  

At the same time, although ING finances a lot of sustainable activities, as a funder of the real economy, we still finance more that’s not. It’s about balancing the need for urgent climate action with what today’s economy and society needs to keep functioning.

Global market trends

High inflation and rising interest rates dampened loan demand considerably across all markets in 2023. In Western Europe, volumes in the general corporate loan market significantly decreased year-on-year, a trend that carried through into sustainable finance markets. Yet the volume of financing ING mobilised to support our clients’ transitions to more sustainable business models continued to grow to €115 billion in 2023 vs €101 billion in 2022, outperforming its 2023 target of €107 billion.  ING’s Robert Spruijt, EMEA head of Sustainable Finance says: 

“What really helped is our proximity to our clients, where we combine local sustainable finance coverage with dedicated sector sustainable finance knowledge. This matrix approach proved to be a differentiator to our clients”

This expertise is also reflected in the growing number of transactions in which ING was appointed in a lead ESG role, growing the number of lead roles from 230 in 2022 to 292 in 2023.

Growth ING

“ING’s growth in the sustainable finance market is particularly visible in the volumes of its sustainability-linked structures and green loans”, Jacomijn Vels, global head of Sustainable Finance, adds. Next to growth in volume, the total number of sustainable finance transactions also increased, from 491 in 2022 to 792 in 2023, with ca 35% of transactions done via the sustainability-linked structure. Significant growth was achieved in green loans, growing in numbers from 63 in 2022 to 132 transactions in 2023.

Most of ING’s sustainable finance activity was in EMEA (66%), with sustainable finance transactions in APAC also gaining momentum. The Americas team managed to keep volumes relatively stable in the US, a market characterised by slowing environmental, social and governance (ESG) sentiment ahead of the 2024 elections and general uncertainty about the direction of the next administration.

Jacomijn Vels, Global head of Sustainable Finance: “What 2024 will bring is not easy to predict, remember that the outlook at the start of 2023 was for the Sustainable Finance markets to return to growth, instead we observed a second year of decline in volumes. Longer term the fundamentals however remain strong for a growth case for sustainable finance; increased regulatory support and reporting requirements combined with sustained commitment from investors towards sustainable investments.

Reporting requirements such as CSRD will require many companies to start disclosing their transition plans. As a result, we expect to see increased scrutiny on sustainability-linked and transition solutions. And in particular as to whether the companies’ commitments in these transactions are compatible with the goals of the Paris Agreement and the EU's 2050 climate neutrality target.

We realise however that going green isn’t always black and white. At ING we will continue to support our clients who are willing to transition, whether by knowledge sharing, providing advisory services or by providing financing to them. At the same time the increased scrutiny will likely also sometimes prompt tougher conversations on materiality and ambition of transition plans.”

Sustainability-linked transactions

The main purpose of sustainability-linked transactions is to stimulate ING’s clients to step up their transition by linking their financing to their sustainability performance. ING was the first bank to introduce this concept to the market in 2017 and by the end of 2023, sustainability-linked transactions (loans and bonds) accounted for around 40% of the bank’s total sustainable volumes mobilised at €50 billion. This surpasses 2021’s record €48 billion, which had dropped to €43 billion in 2022. The bulk of these transactions were loans, which also reflects the general sustainable markets where SLLs make up ca 75%-80% of the sustainability linked activity. Despite the overall market where SLLs have been on a decline since 2021 (from EUR 524bn to EUR 453bn in 2022 and reducing to EUR 204bn in 2023), ING increased its sustainability-linked loan activities.

According to Robert Spruijt, the 2023 drop in sustainability-linked volumes generally in the market can be explained on the one side by the total syndicated loan market plunging in 2023, but also by the stricter guidance in the market for lenders around targets setting having had an effect. The latter we see as a positive development - as stated in our position paper on the credibility of this market of 2021 - since stricter requirements on ambition & materiality levels will enhance the impact of the sustainability linked market. We see an increased trend for stricter materiality assessment of key performance indicators and where available we see targets linked to science-based scenarios and backed by reputable benchmarks.

Regulatory environment

Regulators too require companies to start disclosing more granular information about their ESG impact from 2025. This covers both their own activities and those in the rest of their value chain. They’ll have to report on everything from climate, biodiversity and pollution to human rights and governance structure. Companies are also expected to provide more insight into the ESG risks they face and disclose their transition plans.   

Jacomijn expects these transition plans will also become increasingly important in loan and bond markets. Lenders will use them for multiple purposes, to assist in risk assessment, in setting targets and ultimately steering allocation of its capital and resources. she says:

The more information we have about a client, the better we understand how we can help them decarbonise and assess the risks associated with their transition

Sustainable value chains

In summer 2023, ING established the Sustainable Value Chains team with the aim to advise, invest and finance new business opportunities that cut across existing and new value chains that will need to be built or expanded to support the energy transition. The team is zooming in on four specialist areas:  battery manufacturing, EV charging and charging services,  recycling and bio-based materials, and cleantech components and services. 

Often financing solutions supporting these value chains rely on new technologies. This requires funding and investment, which can be riskier. At the same time, these new technologies open up opportunities for new financing solutions.  According to Jacomijn this new  team brings an essential additional focus to ING’s Sustainable Finance activities as it brings specialists together across sectors - like energy, infrastructure and mining – with ING’s sustainability experts, combining our global reach with local expertise and in-depth sustainability knowledge.

What we measure

At ING we’re committed to helping our clients transition to more sustainable business models. To show how we’re doing we measure the volumes of financing we mobilise for these activities. This includes loan products, capital markets, derivatives and advisory services. Where ING has an ESG lead role we record the pro-rata share of the total transaction as we can have more impact by pro-actively engaging on the clients’ sustainability strategy; where we are participants (e.g. in a consortium) we take only our share of the transaction into account. For more information on how we measure volume mobilised, please see page 110 of our 2023 Climate Report.