New York, June 21, 2022 – The three best lenders in the aluminum sector – Citi, ING and Societe Generale – announced today that it will work with RMI’s Climate-Based Finance Center to help clean up the aluminum sector from carbon by forming an Aluminum Climate-Based Finance Working Group. The Working Group will create a Collective Climate Adaptive Finance (CAF) framework that sets out how lenders can support the decarbonization of the aluminum sector, which accounts for 2 percent of all global warming per year, and measure progress towards this goal. By joining the CAF, participating financial institutions will be obliged to assess and disclose the compliance of emissions related to aluminum portfolios with the 1.5 ° C climate targets – and will do so in accordance with established rules. Net-Zero Banking Alliance called by the UN.
The Working Group will include senior metal and mining executives from each participating financial institution and will be assisted by RMI’s Climate-Based Finance Center. The Working Group aims to establish a CAF framework in consultation with leading aluminum and climate organizations, such as the International Aluminum Institute and the Aluminum Management Initiative. The framework will provide consistency and transparency in both reporting and measuring progress towards climate targets. Financial institutions that adopt the latest CAF framework will be able to assess and report on emissions of aluminum credit books, work with their clients to finance low-carbon solutions and support investment in new technologies.
Aluminum is an important building block of modern life, used in everything from space travel to mobile phones, but its production has high emissions. One ton of aluminum produces more than six times as much CO2 for example, emissions from the production of one ton of steel and large amounts of electricity are required. If the aluminum sector were a country, it would be the sixth largest consumer of electricity in the world. Aluminum plays a key role in industrial processes, and the sector’s transition to net zero emissions will be critical to achieving global climate goals.
Working with RMI, banks have already taken the lead in developing frameworks for carbon sequestration in other difficult sectors, such as steel and aviation. Supporting aluminum’s path to a pure zero is another generational opportunity for global banks.
Citi, ING and Societe Generale – heads of the three Working Groups – are hiring more financial institutions to join the Working Group. In addition, any bodies interested in being aware of the process and providing feedback during development are encouraged to join the Monitoring Group. Institutions are invited to submit a statement of interest to join the Working Group or the Monitoring Group.
The Working Group, together with existing decontamination initiatives, will establish a measurement methodology, emission standard, information and reporting framework, and management structure for the CAF framework. The Working Group will invite other financial institutions to adopt the CAF framework in early 2023 and help build the best global climate practices for aluminum finance.
The Climate-Based Financial Center will facilitate communication between the Working Group, leading aluminum producers and sustainable finance partners to ensure that the goals of companies in the aluminum sector and their financial partners are aligned and achievable.
The aluminum CAF frame will be based on the experience gained from the initial framework of the Poseidon Principles for Maritime Shipping and the soon-to-be-launched CAF contract for steel. The Poseidon Principles were launched in 2019 with 11 bank signatories. Today, Poseidon counts 28 signatories, covering more than 50 percent of global ship finance. The aluminum CAF frame is designed to be adopted at a similar rate by global aluminum financiers.
Quotes from Working Group members and consulting partners:
William Husband, Citi’s Global Head of Metals and Mining, Corporate Banking: “In order to achieve zero-zero emissions by 2050, it is important to continue our collective efforts to address climate risks and set common goals and dimensions for sectors that are difficult to reduce. Based on our efforts with RMI to create frameworks for the steel and aerospace sectors, Citi is looking forward to helping RMI develop tools to de-carbonize the aluminum sector and support our customers who want to achieve climate goals.
Arnout van Heukelem, ING Bank’s Global Head of Metals, Mining and Fertilizers: “ING aims to be a leader in the banking sector in building a sustainable future. With our Terra approach, we manage our credit book according to net zero targets. Aluminum is an important commodity for energy transfer and is widely used in modern society. The decarbonization process poses important challenges for the aluminum sector, which requires the integration of interesting 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 determine the ambitious and realistic path to this transition. ”
Lenaig Trenaux, Societe Generale’s Global Head of Metals, Mining and Industry: “ESG and sustainability goals are included in the corporate goals of the Societe Generale. After a previous partnership with RMI’s Climate-Based Financial Center, Societe Generale is pleased to be working with RMI again and to be a founding member of the Aluminum Climate-Based Finance Working Group. Our goal is to help develop a framework for measuring and disclosing emissions related to aluminum financing, and to support the de-carbonization goals of stakeholders in the sector. We are proud to be part of the driving force behind shaping the future of the carbon-free aluminum industry.
Pernelle Nunez, Deputy Secretary General and Sustainability Director of the International Aluminum Institute (IAI): “IAI has more than 50 years of experience in modeling and analyzing industrial data, and we are committed to ensuring that universal data sets and approaches for sector-specific climate change initiatives are available wherever possible. Given the important role that the financial community will play in expanding technologies that are critical to the sector’s decarbonization efforts, we are pleased to work with RMI’s Climate-Based Financial Center, which is developing the aluminum sector framework.
Dr. Fiona Solomon, CEO, Aluminum Management Initiative: “The development and adoption of adapted methods for calculating and disclosing emissions, setting targets and measuring performance is critical to the success of the Aluminum Management Initiative’s sustainability certification scheme. Therefore, we are pleased to work with RMI’s Climate-Based Finance Center to bring together actors from civil society and the financial sector along the aluminum value chain to create the tools needed to work on climate change. We look forward to the final application of tools developed by the aluminum sector to ASI standards and beyond. ”
© 2021 Rocky Mountain Institute. Published with permission. Originally published in the RMI Outlet.
Photo by Thomas Martinez on Unsplash
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