Navigating the shift in the banking industry to promote sustainability

MANILA, Philippines — ING Philippines, like many financial institutions in the country, has been facing substantial hurdles as it strives to promote sustainability amid the global transition to a low-carbon economy.

In an interview with The STAR, ING Philippines country manager Jun Palanca said the urgency for businesses and governments to promote sustainability increases as environmental, social and governance (ESG) challenges intensify.

“ING Philippines faces similar hurdles as other financial institutions in the country when it comes to promoting sustainability. The biggest challenge lies in navigating the shift towards a low-carbon economy,” Palanca said.

“This transition requires not only new technologies and financial tools, but also updated regulations to guide these changes. Furthermore, financial institutions need to be aware of, and mitigate, the new social and environmental risks that may arise during this transition,” he added.

Thus, Palanca said it is crucial to actively engage with stakeholders, including regulators and industry organizations, to advance sustainable development.

Beyond providing funding, financial institutions must also collaborate closely with its clients to help them achieve their target, amplify their impact and coalition-building.

“We are committed to an inclusive approach that makes a meaningful positive impact. By supporting industry peers and advancing the sustainability agenda, we engage in relevant discussions and working groups focused on promoting sustainable finance,” he said.

According to Palanca, the Bangko Sentral ng Pilipinas (BSP) has been proactive in promoting sustainable finance.

This, as Philippine banks navigate through global and local economic challenges that affect their funding decisions.

Thus, banks recognize the BSP’s measures, which includes reducing reserve ratio requirements for sustainable bonds to zero and increasing the single borrower limit by an additional 15 percent for loans dedicated to eligible green or sustainable projects.

“These efforts could help address the significant financing requirements for the country’s sustainable development needs,” he said.

Aside from their commitments, Palanca said ING has made significant progress in advancing sustainability using a data-driven approach.

He said data-driven sustainability involves collecting and utilizing information to guide the bank in implementing measurable and responsible business practices aligned with sustainability goals.

“Data provides insights into commercial opportunities, aids the development of products to support our clients’ transitions, and helps us identify transition risks. It also enables us to benchmark clients against their peers,” he said.

He said the bank tracks data points like whether clients have net-zero targets, intermediate 2030 targets, net-zero transition plans and their positions on the convergence pathway.

The information allows the bank to provide robust data-driven solutions and support their clients effectively in their transition toward net-zero emissions.

Palanca also noted that as a wholesale bank, ING makes its most significant impact through its lending portfolio by aligning commercial and corporate loans with net-zero emission targets.

“We use our internal transition management approach, known as the Terra approach, to guide our portfolio towards low-carbon technologies and energy sources, such as offshore wind and energy storage, while moving away from high-carbon alternatives,” he said.

He said that via the Terra approach, the bank aims to steer most of its carbon-intensive parts of its portfolio towards net zero by 2050.

The Terra approach helps the bank in targeting and analyzing the impact of energy production, fossil fuels, automotive, marine transportation, air transportation, steel, cement, residential and commercial real estate sectors, which are identified as the main causes of greenhouse gas emissions in the lender’s balance sheet.

“The analysis identifies what needs to shift, how much, and by when, highlighting where financing can drive impact,” Palanca said.

“ING Hubs Philippines supports this by housing experts who provide global support services, including financial markets, lending services, client due diligence, risk management, retail operations, and IT infrastructure.”

Currently, the ING Group employs around 250 data scientists globally, with plans to expand this team in the coming years.

“The insights generated by our analytics tools enable us to offer data-driven recommendations to our clients. As part of the ING Group, our Philippines team utilizes these tools to help clients achieve their sustainability goals and progress toward net-zero targets," he added.