{"id":30212,"date":"2023-08-23T09:52:56","date_gmt":"2023-08-23T07:52:56","guid":{"rendered":"https:\/\/reclaimfinance.org\/site\/?p=30212"},"modified":"2023-08-23T09:58:23","modified_gmt":"2023-08-23T07:58:23","slug":"decarbonization-steel-not-making-the-cut","status":"publish","type":"post","link":"https:\/\/reclaimfinance.org\/site\/en\/2023\/08\/23\/decarbonization-steel-not-making-the-cut\/","title":{"rendered":"Decarbonization: steel not making the cut"},"content":{"rendered":"

Due to its reliance on metallurgical coal, the steel sector produces 11% of global CO2 emissions, making it the largest industrial emitter of CO2. (1) <\/b>Decarbonizing the steel sector<\/b><\/a><\/span> is therefore critical to achieving the 1.5\u00b0C target. (2) To align their portfolios with 1.5\u00b0C by 2050, financial institutions must adopt measures to end the development of new metallurgical coal mines and coal-based infrastructure in steelmaking. Even if the adoption of steel decarbonisation targets does not avoid the need for robust sector policies, it is imperative that the institutions that take the plunge and adopt steel targets ensure that they are effective. Analysis by Reclaim Finance shows that few financial institutions have steel targets, and that those that have been adopted are riddled with flaws.\u00a0<\/b><\/p>\n<\/div>

The massive greenhouse gas footprint of the global steel industry is mainly due to its reliance on coal to make coke for use in blast furnaces. Because demand for steel is projected to keep rising, getting coal out of steel is essential in 1.5\u00b0C pathways. Fortunately, solutions already exist to enable steel to clean up its act. Financial institutions need to put in place policies to ensure that these solutions are implemented and that steel companies stop investing in new high-carbon infrastructure.<\/p>\n<\/div>

Banks are (just) in the lead on steel<\/h2><\/span>
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Reclaim Finance has reviewed the practices of 150 banks, insurers and investors (3) in the steel and metallurgical coal sector. Alarmingly, we have found that almost nothing is being done by financial institutions to prevent investments in new metallurgical coal mines and coal-consuming blast furnaces, both long-lived investments which need to end if the steel sector is to align with 1.5\u00b0C. While some investors are engaging companies in both sectors, the policy commitments that we have identified have all been taken by banks. None of the 60 banks covered in our analysis seem to have adopted a sector policy related to steelmaking companies, but four banks<\/a><\/span> have committed to restrict their financial services to metallurgical coal.<\/p>\n<\/div>

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banks only have committed to restrict their financial services to metallurgical coal.<\/div><\/div><\/div><\/div>
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banks out of the 60 assessed have so far adopted a steel decarbonization target. <\/div><\/div><\/div><\/div>
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Sixteen banks out of the 60 assessed have so far adopted a steel decarbonization target. (4) The Net-Zero Banking Alliance (NZBA) requires its members to adopt sectoral targets (and is the only GFANZ alliance to do so), but does not specify which sectors should be covered. (5)<\/p>\n<\/div><\/div><\/div>

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Very few and very disparate commitments<\/h2><\/span>
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It is close to impossible to meaningfully compare the targets of different banks given the wide variation in banks\u2019 initial exposure to the sector and that the key characteristics of their targets vary widely – including with banks using different baseline years and different financed emission metrics. Yet, all the banks’ targets share some important weaknesses, including the following four:<\/p>\n