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Six international banks have agreed to measure and publicly disclose the carbon intensity of their steel lending portfolios, in an attempt to push an industry reliant on highly polluting coal towards net-zero emissions. 

Citi, Crédit Agricole CIB, ING, Sociéte Générale, Standard Chartered and UniCredit have each pledged to start recording and reporting emissions data from next year, signing up to a set of sustainable steel principles developed in partnership with non-profit research organisation RMI. 

The banks have agreed to disclose the extent to which steel sector borrowers are on course to reach net zero emissions by 2050 and to help limit the rise in global temperatures to 1.5°C.  

The principles apply to revolving credit facilities, export finance transactions and working capital facilities, but their application to letters of credit (LCs), bank guarantees and factoring programmes is voluntary. RMI did not comment when asked why those instruments are not automatically in scope. 

Although only initially applicable to banks, the principles will “explore the inclusion of export credit agencies, and consider expanding to include capital markets activity”. 

“Signatories to the [principles] represent a combined bank loan portfolio of approximately US$23bn in lending commitments to the steel sector, for a market share of over 11% of total private sector steel lending,” RMI says. 

Steel is “the largest source of industrial emissions globally”, it adds. 

The coking coal used in the production of steel is one of the most polluting fossil fuels in terms of direct emissions. RMI says the steel sector contributes as much as 7% of all carbon emissions globally. 

“With demand for steel projected to grow 30% by 2050, emissions are set to rise significantly if we continue with business as usual,” it says. 

The agreement is based on the Poseidon Principles, a 2019 agreement between banks and shipping companies to integrate vessel emissions data into financing arrangements. Signatories are now providing more than US$1bn per year in sustainability-linked loans under that agreement, RMI says. 

As well as standardising measurement and reporting of in-scope emissions, the sustainable steel principles contain instructions on how to obtain credible data, engage clients on net-zero transition plans and use the framework for wider industry advocacy and leadership. 

Arnout van Heukelem, global head of metals, mining and fertilisers at ING, hails the framework as “the first climate aligned finance agreement for the steel sector”. 

“The decarbonisation of this industry will require very significant investments over the next 30 years. Banks will have a large role to play in providing part of the funding required to realise this,” he says. 

Richard Horrocks-Taylor, global head of metals and mining at Standard Chartered, adds that the agreement will help developing markets “continue to grow whilst meeting climate objectives”. 

ING and Sociéte Générale led the working group that developed the principles, with the other four banks joining as participants. Allen and Overy provided legal counsel, and metals intelligence company CRU provided data and analysis.  

The agreement has been welcomed by the International Energy Agency. Peter Levi, industry lead for its energy technology policy division, says: “The global average direct CO2 intensity of steel production needs to fall by more than 30% between 2020 and 2030 to align with the International Energy Agency’s net-zero emissions by 2050 scenario. 

“It is encouraging to see lenders to the steel industry consider the [net-zero emissions] trajectory under the sustainable steel principles – the principles and scenario should serve as drivers for industry players to assess and disclose their climate alignment.” 

Annie Heaton, chief executive of non-profit organisation ResponsibleSteel, says the principles “fill a missing link in the efforts to decarbonise the steel industry, by providing a platform for lenders to set clear expectations of their clients and accelerate the flow of funds to near-zero greenhouse gas steel production”.