New York, June 21, 2022 – The top three lenders in the aluminum industry – Other, ING and Societe Generale – today announced that they will partner with RMI’s Center for Climate Finance to help decarbonise the aluminum sector by setting up a Climate Aluminum Finance Task Force. The Task Force will develop a Framework for Customized Climate Adjustment (CAF), which defines how lenders can support the decarbonisation of the aluminum sector, which accounts for 2 percent of all global warming emissions per year, and measure progress towards this goal. By signing the CAF framework, the participating financial institutions undertake to assess and disclose the extent to which the emissions associated with their aluminum portfolios are in line with the 1.5 ° C climate targets – and to do so in accordance with the guidelines set by the UN-Zero Banking Alliance.
The task force is composed of executives in the field of metals and mining from each participating financial institution and will be assisted by the RMI Climate Adaptation Center. The aim of the working group is to create a CAF framework in consultation with leading aluminum and climate organizations such as the International Aluminum Institute and the Aluminum Stewardship Initiative. The framework will create consistency and transparency both in reporting and in measuring progress against climate targets. Financial institutions that adopt the final CAF framework will be able to assess the emissions of their aluminum loans and work with their clients to report their emissions, finance lower-carbon solutions and support investment in new technologies.
Aluminum is the cornerstone of modern life, used in everything from space travel to mobile phones, yet its production is highly emission-intensive. The production of one tonne of aluminum produces more than six times as much CO2 emissions arising, for example, from the production of a tonne of steel and requires a huge amount of electricity. If the aluminum sector were a country, it would be the sixth largest consumer of electricity in the world. Aluminum is key in industrial processes and the sector’s transition to net zero emissions will be crucial to meeting global climate targets.
In collaboration with RMI, banks have already taken the lead in developing frameworks for decarbonising other sectors that are difficult to reduce, such as steel and aviation. Promoting aluminum’s path to net zero represents another opportunity for global banks once a generation.
Citi, ING and Societe Generale – the three leaders of the working group – are hiring additional financial institutions to join the working group. In addition, all institutions that are interested in staying up to date and providing feedback during development are invited to join the Review Group. Institutions are invited to submit expressions of interest in order to join a working group or monitoring group.
The working group, in cooperation with existing decarbonisation initiatives, will set out the measurement methodology, the emission benchmark, the data and reporting framework and the governance structure for the CAF framework. The task force will call on other financial institutions to adopt the CAF framework in early 2023 and to help identify global climate best practices for aluminum financing.
The Center for Climate-Aligned Finance will facilitate cooperation between the working group, leading aluminum producers and partner organizations focused on sustainable financing to ensure that the goals of aluminum companies and their financial partners are aligned and achievable.
The CAF Aluminum Framework will build on the experience gained from the initial framework of the Poseidon Principles for Maritime Transport and the forthcoming CAF Steel Agreement. The principles of Poseidon were launched in 2019 with 11 banking signatories. Today, Poseidon has 28 signatories covering more than 50 percent of global ship financing. The Aluminum CAF framework is to be designed to be adopted similarly quickly by aluminum financial institutions around the world.
Quotes from working group members and consulting partners:
William Husband, Global Director of Metals and Mining, Corporate Banking at Citi: “In order to achieve zero net emissions by 2050, it is essential to continue our joint efforts to address climate risks and identify common targets and measurements for sectors that are difficult to reduce. Building on our efforts with RMI to create a framework for the steel and aerospace sectors, Citi looks forward to helping RMI develop tools to decarbonise the aluminum sector and to support our clients who are working to meet their climate goals. ”
Arnout van Heukel, Global Director of Metals, Mining and Fertilizers, ING Bank: “ING aims to be a banking leader in building a sustainable future. With our Terra approach, we manage our loan book in line with zero goals. Aluminum is a key commodity for energy transformation and is widely used in modern society. The decarbonisation path presents significant challenges for the aluminum sector, which will require the combination of exciting new technologies with existing processes. Through our participation in this working group, we want to determine what the energy transition means for the sector and our customers. It will also help us determine what an ambitious but realistic path to this transition looks like. ”
Lenaig Trenaux, Global Director of Metals, Mining and Industry at Societe Generale: “ESG’s goals and sustainability are part of Societe Generale’s corporate purpose. Following a previous partnership with RMI’s Center for Climate Finance, Societe Generale is pleased to be a partner of RMI again and to be a founding member of the Aluminum Climate-Aligned Finance Working Group. Our ambition is to help develop a framework for measuring and publishing emissions related to aluminum financing and to support the decarbonisation objectives of the stakeholders involved in this sector. We are proud to be part of the driving force behind the future of the decarbonised aluminum industry. ”
Pernelle Nunez, Deputy Secretary-General and Director of Sustainability, International Aluminum Institute (IAI): “IAI has more than 50 years of experience in industrial data modeling and analysis, and we are committed to ensuring that common data sets and approaches are available for sector-specific climate change initiatives whenever possible. Given the important role that the financial community will play in disseminating technologies that are critical to the sector’s decarbonisation efforts, we look forward to working with RMI’s Climate Finance Center to develop a framework for the aluminum sector. ”
Dr. Fiona Solomon, CEO, Aluminum Stewardship Initiative: “The development and implementation of harmonized methods for taking into account and publishing emissions, setting targets and measuring performance is crucial to the success of the Aluminum Stewardship Initiative’s sustainability certification scheme. We are therefore pleased to be able to work with RMI’s Climate Finance Center to bring together actors from across the aluminum value chain, civil society and the financial sector to create the necessary tools for climate action. We look forward to the final deployment of tools developed in the aluminum industry through and beyond ASI standards. ”
© 2021 Rocky Mountain Institute. Published with permission. Originally published on RMI Outlet.
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