02.11.2021
Erste Group commits to zero emissions target for its lending and investment portfolio
- Joins the UN-convened Net-Zero Banking Alliance initiative
- Erste Group also signs the UN Principles for Responsible Banking
- As early as 2023, Erste Group plans to operate on a climate-neutral basis
Erste Group is the first bank based in Austria and Central and Eastern Europe to join the United Nations’ Net-Zero Banking Alliance (NZBA) initiative. By doing so, the banking group commits to aligning its lending and investment portfolio to net-zero emissions by 2050 at the latest. In addition to the Net-Zero Banking Alliance, Erste Group is simultaneously joining the Financial Initiative of the UN Environmental Program (UNEP FI) and signing the UN Principles for Responsible Banking. By taking these steps, Erste Group is setting the next milestone in its sustainability policies and activities, having adopted a new coal policy and joined the EU Green Consumption Pledge and the Partnership for Carbon Accounting Financials (PCAF) earlier in 2021. Erste Group plans to be climate neutral in its own operations as early as 2023.
“The strong operating results that we’ve achieved during the first three quarters of this year put us in a comfortable position to devote our full energy to the important strategic initiatives in the area of sustainability,” explains Bernd Spalt, CEO of Erste Group.
“Joining forces with other major institutions under the UN's leadership helps us in our efforts to strengthen funding for attaining a greener future and reducing emissions. It’s about the task of the century: climate neutrality. We're continuing on our path towards being a more sustainability-focused bank – and we're leading the way.”
In general, Erste Group has a low exposure of just over 1% of its total loan portfolio towards such emission-intensive industries as coal-based power generation, steam production, cement production, livestock farming or waste management. Erste Group has a very good starting point for achieving its net zero commitment: its total financed emission intensity is just below 100 CO2e per euro, reflecting the balanced, regional and sectoral distribution of its loan portfolio.
Clear commitments on the way to Net-Zero
A total of more than 80 banks from 36 countries are part of the Net-Zero Banking Alliance. With the combined assets of its members totaling approximately USD 64 trillion, the Alliance represents around 40% of the world's overall banking assets.
Alliance members commit to setting scenario-based interim emissions reduction targets for 2030 (or sooner) for the highest-impact sectors, i.e., the most greenhouse gas-intensive and highest-emitting sectors. In addition, strict reporting guidelines apply to the annual publication of emissions and emissions intensity or the disclosure of progress as mapped against a transition strategy reviewed at board level.
Erste Group must develop initial targets within 18 months (initially in its sustainability report for 2022), taking into account the most robust, science-based guidelines available, and thereafter disclose them in annual reporting.
Promising Outlook for the CEE region
Over the course of the past quarter, the economic growth outlook for Erste Group’s CEE core markets in 2021 was again upgraded from 3-7% to 3.3-7.5%. The development of other economic indicators is expected to vary depending on Covid-19 policy measures imposed by authorities and/or the phasing out of state support. Unemployment rates are expected to rise slightly but, in the Czech Republic and Hungary, should remain among the lowest in the EU. Inflation rates are forecast to rise across all geographies. In most countries, sustained competitiveness should again result in viable current account balances. The fiscal situation should likewise improve again after the significant budget deficits posted in the year 2020.
As part of its ambitious plan to become the first climate-neutral continent by 2050, the EU adopted a set of proposals in July 2021 that would make it possible to reduce net greenhouse gas emissions by at least 55% (compared to 1990 levels) by 2030. Achieving this reduction will require major investments across the entire economy. The EU Recovery Funds provide governments in Central and Eastern Europe with substantial funding ranging from 3.3% of GDP in the Czech Republic to over 13% of GDP in Romania and Croatia. In the CEE region, 52% of these funds are dedicated to green investments - compared to 43% in the Eurozone.
About the Net-Zero Banking Alliance:
- Convened by the United Nations, the Net-Zero Banking Alliance encompasses over 60 banks that have committed to combining near-term action with accountability: Member banks must set an intermediate target for 2030 or sooner, using robust, science-based guidelines.
- The Alliance will reinforce, accelerate and support the implementation of decarbonization strategies, providing an internationally coherent framework and guidelines, supported by peer-learning from pioneering banks.
- The Alliance is convened by the United Nations Environment Programme Finance Initiative and is the banking element of the Glasgow Financial Alliance for Net Zero, and has been accredited by Race to Zero.
- The Net-Zero Banking Alliance recognizes the vital role of banks in supporting the global transition of the real economy to net-zero emissions.