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Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, an S&P Global podcast, where Esther and I take you inside the environmental, social and governance issues that are shaping the rapidly evolving sustainability landscape.

Esther Whieldon: On this podcast, we've heard multiple times how reaching net-zero emissions will require action by many different stakeholders across the private and public sector. It’s all hands on deck. 

Well in the coming episodes we'll be taking a deep dive into the many dimensions of the low-carbon energy transition. 

Lindsey Hall: That's right and we're doing this by taking the ESG Insider podcast on the road to Houston, Texas, for S&P Global's annual energy conference CERAWeek. 

At CERAWeek thousands of executives and government leaders gather to discuss the biggest challenges and opportunities for energy. And that includes for sustainability issues such as climate change and enabling the low-carbon transition. The conference convenes leaders from global energy companies and utilities, as well as from the automotive, manufacturing, tech, policy and financial space.

Esther Whieldon: And as you might guess from the background noise, Lindsey and I are on the ground at CERAWeek and over the next couple days, we'll bring you short interviews from the sidelines of the event. 

Okay. Let's dive into today's interview.

First of all, thank you so much for joining us. Can you start by introducing yourself and talking a little bit about your role at ING. 

Ana Carolina Oliveira: My pleasure. Thanks for having me. So my name is Ana Carolina Oliveira. I head the Sustainable Finance team for ING in the Americas. And for those not so familiar with ING, we are a multinational bank, universal bank with retail and wholesale operations is about 40 countries across the globe. In the U.S., we represent wholesale banking clients, primarily through offices in the U.S. and Mexico. And I'm here to talk about some of the challenges around finance clean energy. 

Esther Whieldon: Can you talk a little bit about what you're hoping to hear or what kind of conversations you're hoping to have while you are here? 

Ana Carolina Oliveira: There's so much to take in. It's really a lot of all the topics. And one thing a bit biased to say, but I said sustainability is intertwined along many of the discussions. I think the expression here, the most so far has been energy transition. And that's something that ING and myself are very vested into. We take a very big responsibility in aligning our portfolio to Net Zero. And part of that is having several actions related not only to energy transition, but transition of the economy as a whole. So I'm very excited to see that has being a protein center of all the conversations thus far. 

Esther Whieldon: Ana went on to describe 3 ways ING is engaging with energy companies to help facilitate the low carbon transition. By the way, you'll hear her mention IRA that stands for the Inflation Reduction Act. Okay. Here she is. 

Ana Carolina Oliveira: So the first one, we started to do at a portfolio level. So we have decided to set GHG reduction targets for the sectors, the most high carbon-intensive sectors in our portfolio, energy being a large one. 

So for these sectors, we look at the annual reduction of GHG emissions at both portfolio and client level. We publish that every year as part of our climate report, and we've been doing this since 2019. So this is kind of top of the house. 

Number two, we look at helping clients to identify green and projects related to cleaner energy and low carbon transition to potentially tap the label to that market. So when I say that is the green bones, the green loans of the world, because by doing so, we hope they have access to a larger set of investors and liquidity to help fund some of those clients. So for example, we raised green bonds to finance alternative fuels for Petrochem, just to give you an example. 

And thirdly, we have dedicated specialized financing. We are primarily a commercial bank, so we lend a lot. And we do that with a traditional renewable energy project generation. And there recently, we tripled our targets to bring the $2.5 billion annual financings we've done in 2022 to $7.5 billion by 2025. 

And the last piece there, we created dedicated pockets of capital for what we call new energy technologies. And there, we are looking to explore more features like carbon capture storage, hydrogen, biofuels and getting smarter and better and financing those as well. 

Esther Whieldon: And who do you find is coming to you the most for those newer technologies, like what sectors or what kind of companies? 

Ana Carolina Oliveira: Interestingly, we decided to set some specialized funds within the energy vertical, so created the hydrogen, the biofuels. But soon enough, we realized it was the entire value chain. And actually, we have been talking to different pieces of that equation. So not only the energy producer. To give an example, Clean Energy is a must-have for data centers, which is a completely separate sector. But we talk to both ends. 

And then we're actually connecting data center developers that need access of the clean power to the clean power generators that need the offtake contract to get better terms into the financing. So we are connecting those energy and advancements in alternative energy or cleaner energy to several parts of different chains. 

Another interesting one is when we look at also the petrochemicals or the plastic value chain, where we initially went with a view for the energy component of it and actually find out financing a lot of the recycling technologies, advanced recycling ,to make sure there is sufficient alternative feedstocks to go into that. 

Similarly, when we look at the electrification or EVs, we thought we would be looking primarily at the producers of the cars. But interestingly enough, they tend to find financing probably easier than some of their chain. Where we are putting more emphasis these days is really in the infrastructure that goes about it. So we have been engaging in financing some of the Gigafactories for battery for electric factories, but also the charging stations and everything that needs to happen to connect the cars actually to the grid, which tend to be much smaller players that might not have that access so easily like the big ones. 

But we take a view on this theme, and then we go and support that part of the equation as well. So at the end of the day, it's really a whole society, or economy story, and we are trying to come as a bank in many parts of that chain. 

And one point I wanted to add is that we have these large corporate clients as well. And many times, we know them, we like the credit risk profile. We go to them and say, would you be willing to play a role here and maybe take some of that risk away by being an offtaker for that project? Because if I now have you at the end of the line, the risk profile when my risk manager has a very different way to look at that smaller player that wouldn't have otherwise. So that's something making connections across the chain that we are trying to do more. 

Esther Whieldon: That's interesting because one of the things I often hear is there's not enough opportunity for finance because the risk profile is so big for these technologies. And you're saying that potentially one way to solve that is to find the offtakers so that the bank knows they're not going to lose money on it. 

Ana Carolina Oliveira: Exactly. It's funny because if you ask what is the challenges, the availability of capital, even if you think about the $5 trillion that needs to be put every year to finance transition by 2030, believe it or not, this money is out there. 

The challenges this mismatch between legacy risk return profiles, the way banks were wired to look at risk return for something now that still needs to be scaled and the technology sometimes still needs to be proven. And you come and try to fit that into the same model you're using before, it just doesn't work. 

So we need to derisk it. And there are many ways to try to do that. We are looking at corporates to see if as playing an offtaker that helps to reduce the cash flow risk. The other ways to look at, of course, the government, so hybrid finance is not a new thing. 

So we have been looking to see whether the government can provide guarantees. So of course, you have the traditional export financing. So if the U.S. government is supporting the export of equipment to emerging countries that de-risks that project allows us to invest. So we have done this with a solar project in Angola, where the U.S. government came into the risk of the project, and therefore, my risk officer had approved. 

The other thing we're exploring, of course, with the IRA. There was a lot of subsidies and support put into the system. So we are looking to our clients and see whether we could facilitate their access to maybe some of the grants in the loan program. So its the government at the end still, but maybe by having a commercial bank next to them that access somehow becomes more straightforward. 

Esther Whieldon: Now how do you approach the just and equitable transition side of it? 

Ana Carolina Oliveira: Great question. Thanks for asking that. Usually, we are very fixated on the "E" side of the equation, and it needs to go hand in hand. As a very regulated party as a bank is, of course, we need to make sure the risks are managed. And before we even start looking at the opportunity, we need to make sure there are the minimal requirements, safeguards and those things that are properly managed. 

So we take a very careful look before onboarding any client whether they are meeting the requirements when it comes to our policies and managing risks and also engaging communities. Especially energy when you think about pipelines, trespassing communities, that can be a quite sensitive process. So ensuring that you are complying with IFC international standards when it comes to community engagement, that's kind of a must-have. We need to do all that work first and then we can jump in and look at the opportunity side. 

Esther Whieldon: What are you hoping to hear from energy companies and utilities here? 

Ana Carolina Oliveira: So we need to triple the generation of clean energy. That doesn't seem to be the issue. There is a lot of developing happening. 

And apparently still the biggest challenge in hurdle remains with the permitting, the transmission, the connectivity to the grid and how much red tape, believe it or not, it still faces and I hear numbers like a wind power taking almost 25 years to get the permits in place in seeing today. 

So what I would love to hear is that there is a spirit of partnership, really action push to expedite the permitting and the process that are required to have the projects approved. We cannot keep waiting 10 years to start having when there's so much money and demand for clean power. 

And to give you an example, we had -- of course, we are a Dutch bank, we are based in Europe, and we have participated in a project in Sweden, which is called H2 Green Steel, where it's basically a very big project to produce clean steel, which is quite challenging. And believe it or not, the company came as a start-up, and they basically managed to get with the support of the Swedish government, all the approvals in 9 to 12 months, which would take a couple of years because there was a collective interest to say, we need to get this running. The communities came in, there was a consultation. Everything was done but it was done in a reasonable time frame to benefit from the liquidity on the market of today. So I would love to hear that happening in the U.S. in some shape or form. 

Esther Whieldon: How has the inflationary environment affected access to capital? 

Ana Carolina Oliveira: I think the raising interest environment obviously has a dent into overall lending activity. So if you think, again, from the perspective of commercial bank being a lender, everything became more expensive, more difficult to get approval, there's a bit of a risk aversion. So you have to be looking at longer tenors and higher tickets, which is, of course, more difficult to get in.

But I would say there is maybe not enough, but I think there is a sense of urgency from some of these niche sectors or activities that need to happen for transition to become more tangible. 

So I do see a lot of my peers joining forces and say for this particular vertical like carbon capture, if I show up with a $1 billion request, I probably would never get approval, but let's make a club, let's make a joint group of lenders like minded lenders that could make that more palatable. 

So I do think there is hope to unlock that challenge. And those partnerships are starting to emerge, but we need a lot more of them, and we need them much faster. There's still, I think, a little bit of a view like let's see who goes there first. And if they don't get burned, then we jump in. 

And as many institutions, we got together to talk about net commitments and how we could collectively collaborate to disclose more and share best practices. I would invite financiers, investors and banks out there to also get together and say, "Look, we are competing, but we need to deliver this transition. We have a role to play here. Why don't we find ways, as I was saying before, to derisk things together more than, oh, we will take a bigger ticket than you are." But having that spirit, not only on the disclosure level or aligning our goals but also actually putting money to work in a way that achieves this bigger goal. 

Esther Whieldon: One thing we've been hearing more about, and we've already talked a little bit about the social side, but sort of the intersection of sustainability topics, how you can't really think about one without thinking about the other. And just curious how much nature on biodiversity is on the radar of ING? 

Ana Carolina Oliveira: Yes. No, definitely on the radar, I would say, carbon definitely took precedence and everything was about decarbonizing and reducing emission. 

We just published this year our view on biodiversity and how we are looking to see -- and you see water to me is always an interesting one because that is really related to climate, is related to human and biodiverity, its probably everything. 

But we are putting a position out there that we start measuring and we are looking at our risk models to start to quantify how much biodiversity risk as we do with climate risk has an impact into our credit profile. Still early days compared to how much we are advancing climate. But from the teams like myself, which to structure green loans or bonds, we are really seeking to set ambitious key performance indicators in terms of biodiversity. And that fits a lot in food and agri and things, which sometimes gets a bit forgotten because energy takes such a center piece, but that's coming next. So stay tuned because we'll be putting a lot of more out there on biodiversity. 

Esther Whieldon: Are there any topics we didn't get to that you wanted to mention? 

Ana Carolina Oliveira: There's maybe one interesting thing that people sometimes right or around, look at banks and say, you don't -- you move very slowly, we don't do enough. And there is definitely a sense of urgency, I would say, for the large players. And the way I -- this has been materializing, I think we went through 3 phases. 

The first one was setting the ambition and there was all about having goals and net zero commitments and all that. And then step 2 became proved me that your ambition is real, and I want an external validation. I want to see your disclosures, your reports. 

And then banks jump in front of clients saying this is what I expect from you. I think finally, we are getting to stage 3, which is really translating that ambition into action and putting the money to work, which before was more like whenever this technology is ready, call me, but now it's like there's no time to wait. We need to put that. 

And what we are doing at ING, we created what we call climate transition plans. We basically created a tool, right? We look at all our clients that have publicly disclosed their goals, their ambitions when it comes to transition, and they say, to cut emissions by 45% by 2030, for me to be able to do that, these are the investments I have to make. This bit comes from renewable energy. This is retrofitting, this is, whatever it is. And that's where we are coming and say, because you have to do that right away, I'm going to help you to finance a portion of that. 

And we check that every year for every single credit discussion, which I would say, I've been banking for couple of years almost 2 decades is the very first time I saw the 2 really converging the same committee. You check what's the risk profile and what's your GHG emissions profile at the same decision moment, which is great.

Esther Whieldon: So today, we heard how ING is working to help solve the energy transition climate finance gap. It's doing that in part by improving the financial risk profile of emerging technologies so that banks like ING feel comfortable financing them. She also talked about some of the remaining challenges to closing that finance gap and how ING is starting to measure and figure out the risks tied to topics such as biodiversity and nature.

Lindsey Hall: We have so many more insights to share from CERAWeek. 

Esther Whieldon: So please stay tuned for more key takeaways.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. If you like what you heard today, please subscribe, share and leave us a review wherever you get your podcast.

Esther Whieldon: And a special thanks to our agency partner, The 199. See you next time.

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