Science-based targets pushing decarbonisation

Financiers like NIB redirect capital flows to sustainable and resilient investments. This approach is mirrored by some of our clients, like the Danish technology provider FLSmidth in its work to cut emissions in the hard-to-abate cement and mining industries. Here is how sustainable finance and science-based targets help cut emissions in sectors with few decarbonisation alternatives.

NIB participated as an observer in the 28th session of the Conference of Parties (COP28) in Dubai under the United Nations Framework Convention on Climate Change (UNFCCC). This article is based on a panel debate at the Nordic pavilion on how climate targets can drive decarbonisation.

Stepping up to net zero

At COP28, NIB also unveiled a strategy for net-zero emissions by 2050 in alignment with the Paris Agreement, while targeting an ambitious emissions reduction by 2030 in line with the European Union’s climate goals.

“We’re moving from financial commitments to actually science-based types of commitments,” said Luca De Lorenzo, Head of Sustainability and Mandate at NIB.

A key focus of NIB’s climate strategy is to target the so called hard-to-abate sectors that have few options to decarbonise and to manage supply chain emissions. De Lorenzo emphasised the importance of this approach, saying that we need to bring the finance to where the emissions are and then bring them down.

“As a metaphor, we are unafraid of getting our hands dirty and then cleaning them, as it may be that we’ll see an increase in our financed emissions in the immediate term but then bring them down,” De Lorenzo said, adding, “That’s the fundamental logic of our strategy.”

Translating science into targets

NIB plans to validate its climate targets with the Science Based Targets initiative (SBTi).

Lígia Ramos from Science Based Targets initiative explained how SBTi, in partnership with organisations like the CDP, United Nations Global Compact, World Resources Institute and the WWF, interprets climate science from sources such as the IPCC and the International Energy Agency.

“We translate the climate science from these sources into practical tools, criteria and methods.”

Ramos highlighted that SBTi also helps validate the targets to ensure credibility. The process includes an independent third-party validation, making the targets not just credible but also comparable across different sectors and regions.

Currently, SBTi has nearly 7,000 globally committed companies, with 4,000 companies having had their targets validated, and of which 500 have validated net-zero targets, indicating the highest level of ambition. Among 250 financial institutions, some 74 have validated targets.

Supplier-customer emission cuts

Cement and mining, which together account for 10% of global emissions, are areas where FLSmidth is actively working on emissions reduction.

Nour Amrani, Head of Public Affairs at FLSmidth said, “Four years ago, we set our sustainability programme MissionZero, in which we committed to developing the solutions for our customers to support them towards zero emissions—in other words, developing all the solutions by 2030 so that we can have zero-emissions cement and zero-emissions mining.”

A significant aspect of FLSmidth’s strategy involves working with suppliers and customers to reduce emissions. Amrani said the target of ensuring that their suppliers also have science-based targets by 2025 will be attained by FLSmidth leveraging its power of procurement.

“From our customers’ perspective, we focus on economic intensity in our offerings, ensuring that what we sell increasingly comprises solutions that enable our mining and cement clients to reduce their emissions,” said Amrani.

“To clarify, the infrastructure and renewable energy sectors are essential for the future development of the likes of battery technology. We cannot simply dismiss the mining companies; instead we must seek solutions,” Amrani said.

Financial implications

When asked about the benefits of having science-based targets in discussions with financiers, Amrani affirms, “Yes, absolutely.”

“A very good example from this year is that we have a new major shareholder because of our sustainability commitment, and because it’s validated. And we also see an increasing understanding from the financiers that they cannot ignore the hard-to-abate industries and the difficulties. It’s relatively easy to invest in renewables, but one actually also needs to go for the hard-to-abate sectors and the mining industry that will be supplying the minerals for the energy transition,” Amrani said.

Domino effect

For now, various organisations’ dedication to adhering to science-based targets and including sustainability in the fundamental business strategy seem strong. It remains to be seen whether this will be enough to steer us towards an environmentally conscious and economically viable world. 

“That’s the new thinking. That’s how we’ve set the climate strategy. I think that’s how the science-based target framework is set up, and with our client, FLSmidth, and the sustainability-linked loan we have with them, it’s a prime example of what we want to do more of basically,” said De Lorenzo.

Watch the discussion: