Leading lenders to the global aluminum sector — Citi, ING, and Societe Generale — are working together with RMI to develop a climate-aligned finance framework to help reduce the industry’s hard-to-abate emissions.

Three top lenders to the aluminum sector — Citi, ING, and Societe Generale — today announced that they will partner with RMI’s Center for Climate-Aligned Finance to help decarbonize the aluminum sector by forming the Aluminum Climate-Aligned Finance Working Group. The Working Group will create a collective climate-aligned finance (CAF) framework that defines how lenders can support the decarbonization of the aluminum sector, which accounts for 2 percent of all planet-warming emissions per year, and measure progress toward that goal. By signing up to the CAF framework, participating financial institutions will commit to assessing and disclosing the degree to which the emissions associated with their aluminum portfolios are in line with 1.5°C climate targets — and to do so in accordance with the guidelines set forth by the UN-convened Net-Zero Banking Alliance.

The Working Group comprises senior metals and mining leaders from each participating financial institution and will be facilitated by RMI’s Center for Climate-Aligned Finance. The Working Group aims to create a CAF framework in consultation with leading aluminum and climate organizations, such as the International Aluminium Institute and the Aluminium Stewardship Initiative. The framework will create consistency and transparency in both reporting and measuring progress against climate targets. Financial institutions that adopt the final CAF framework will be able to assess the emissions of their aluminum loan books and work with their clients to report their emissions, fund lower-carbon solutions, and support investments in new technologies.

Aluminum is an essential building block of modern life, used in everything from space travel to cell phones, yet its production is highly emissions intensive. Producing a ton of aluminum generates more than six times the CO₂ emissions generated by producing a ton of steel, for example, and requires enormous amounts 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 transitioning the sector to net-zero emissions will be critical to meeting global climate goals.

Working with RMI, banks have already taken the lead in developing frameworks for decarbonizing other hard-to-abate sectors like steel and aviation. Supporting aluminum’s path to net zero represents yet another once-in-a-generation opportunity for global banks.

Citi, ING, and Societe Generale – the three Working Group leads – are recruiting more financial institutions to join the Working Group. Additionally, any institutions interested in remaining up to date with the process and providing feedback during development are encouraged to join the Review Group. To join the Working Group or the Review Group, institutions are invited to submit an expression of interest.

The Working Group will establish the measurement methodology, emissions benchmark, data and reporting framework, and governance structure for the CAF framework in collaboration with existing decarbonization initiatives. The Working Group will invite other financial institutions to adopt the CAF framework in early 2023 and help set global best practices on climate for aluminum finance.

The Center for Climate-Aligned Finance will facilitate engagement between the Working Group, leading aluminum producers, and partner organizations focused on sustainable finance to ensure the objectives of firms in the aluminum sector and their financial partners are aligned and actionable.

The aluminum CAF framework 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 agreement for steel. The Poseidon Principles were launched in 2019 with 11 banking signatories. Today, Poseidon counts 28 signatories covering more than 50 percent of global ship finance. The aluminum CAF framework is intended to be designed for similar rapid adoption by aluminum financiers globally.

See related article: Citi Launches New Deposit Solutions to Support Clients’ Sustainability Agenda

Quotes from Working Group members and consultation partners:

William Husband, Global Head of Metals and Mining, Corporate Banking at Citi: “In order to achieve net-zero emissions by 2050, it is essential to keep up our collective efforts to address climate risks and identify common goals and measurement for hard-to-abate sectors. Building on our efforts with RMI to create frameworks for the steel and aviation sectors, Citi looks forward to assisting RMI with creating tools for decarbonizing the aluminum sector and supporting our clients as they seek to meet their climate targets.”

Arnout van Heukelem, Global Head of Metals, Mining & Fertilizers, ING Bank: “ING aims to be a banking leader in building a sustainable future. With our Terra approach we’re steering our lending book in line with net-zero goals. Aluminum is a crucial commodity for the energy transition and is widely used in modern-day society. The path of decarbonization poses significant challenges ahead for the aluminum sector, which will require combining 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 also realistic path for this transition looks like.”

Lenaig Trenaux, Global Head of Metals, Mining and Industries at Societe Generale: “ESG and sustainability objectives are embedded in Societe Generale’s corporate purpose. Following previous partnerships with RMI’s Center for Climate-Aligned Finance, Societe Generale is pleased to partner again with RMI and act as a founding member of the Aluminum Climate-Aligned Finance Working Group. Our ambition is to assist in developing a framework to measure and disclose emissions related to financings in aluminum, and support decarbonization goals of stakeholders involved in this sector. We are proud to be part of the driving force to shape the future of a decarbonized aluminum industry.”

Pernelle Nunez, Deputy Secretary General and Director Sustainability, the International Aluminium Institute (IAI): “The IAI has more than 50 years of experience modeling and analyzing industry data, and we are committed to ensuring that common data sets and approaches are available for sector-specific climate change initiatives wherever possible. Given the important role that the financial community will play in scaling up technologies that are crucial to the sector’s decarbonization efforts, we are pleased to be working with RMI’s Center for Climate-Aligned Finance as they develop the aluminium sector framework.”

Dr Fiona Solomon, CEO, Aluminium Stewardship Initiative: “The development and uptake of harmonized methods to account for and disclose emissions, to develop targets, and to measure performance is critical to the success of the Aluminium Stewardship Initiative’s sustainability certification scheme. We are therefore delighted to partner with RMI’s Center for Climate-Aligned Finance, to bring together actors from along the aluminium value chain, from civil society, and from the financial sector to build the necessary tools for climate action.  We look forward to the ultimate deployment of the developed tools by the aluminium sector through ASI’s standards and beyond.”

Source: RMI