Climate adaptation

What is climate adaptation and why do we need it?

The current 1°C rise in global temperatures compared to pre-industrial levels is already leading to more frequent and severe extreme weather events like heatwaves, floods, and wildfires. These events have caused substantial damage, hitting the most vulnerable populations and ecosystems the hardest. Given that the impact of climate change varies due to accumulated greenhouse gas emissions, even with significant emission reductions in the future, global warming will persist for several decades. Therefore, beyond just climate mitigation, it's crucial to focus on reducing our vulnerability to the adverse effects of climate change through climate adaptation measures.

Climate adaptation is linked to fighting climate change, or climate mitigation. When addressed jointly, their impact can be magnified. For example, urban green measures like green roofs help reduce GHG emissions from energy use. But it also increases water absorption capacity, thereby making urban areas more resilient to potential flooding events.

Climate adaptation falls into the categories of preventing, responding, and recovering. In terms of prevention, nature-based methods show that a healthy ecosystem can provide natural buffers to climate disaster. For example, planting mangroves in a coastal wetland can help water storage, and thereby reduce flood risk in neighboring communities. For responding to climate disasters, technology and innovation, such as more accurate weather forecasts, is one area to focus on. And as for recovering, examples include insurance instruments or healthcare capacity to treat illness resulting from changing climate.

How is climate adaptation relevant to us as a bank?

Improving our understanding of physical climate risk drivers and their impact on our portfolio under different climate change scenarios will help us identify companies or business areas vulnerable to climate change and then engage with them to support adaptation efforts. In other words, in addition to reducing the physical risks impact on our portfolio, we can support clients and communities to adapt through financing.

Adaptation requires investment by governments, companies and private individuals. There is currently a financing gap which constrains climate action. Hence, we recognise that as a bank, we have a role to play.

To reduce the physical risk impact on our own operations and portfolios, and support clients and communities to adapt and become more resilient to climate change, ING’s approach is to:

Continue adapting our own operations.

As a bank, we’re exposed to physical climate risks (in particular, adverse weather) through our operations. We must ensure that we can continue to deliver key services and products if such events occur. Our Business Continuity Framework identifies impacts of climate-related physical risks (as a result of our climate-related risk management approach) and our ability to recover from them. We revisit the assessment yearly, where we update and rehearse our recovery plans for disruptive events such as windstorms or flooding.

Support adaptation through our financing

Supporting society and clients
When we finance clients who are exposed to physical risks from climate change, we’re exposed to those risks as well. Therefore, we aim to support clients to adapt and become more resilient to climate change. For more detail on our approach for identifying clients with high physical risks, please see our climate report and the annual report.

Managing environmental risk, such as from biodiversity loss, can also contribute to adaptation, and we’re committed to working with our clients on this. For more information, read our position on nature and biodiversity.

Our biggest positive impact on fighting climate change is with our financing. We support clients in a variety of ways, from sharing best practices on the matter of climate adaptation in the industry, to financing adaptation projects. For example, our sustainability improvement loans link a client’s interest margin to the improvement of their ESG score or specific key performance indicators, or KPIs. These KPIs can support climate adaptation efforts, such as water and wastewater management or energy reduction initiatives.
Climate change can have an impact on human rights, such as the right to life, to food, and water. It is often the case that those who are most impacted are those who are already vulnerable. That’s why we aim to engage with businesses that can contribute to societal adaptation through infrastructure, technology, or innovation.

For example, in 2021 ING acted as sole sustainability advisor in a financing package to build the UK’s first new reservoir in a generation, ensuring water resilience in the region for the next 80 years. The borrower is one of the six water-only companies in England and Wales, providing clean drinking water to about 750,000 people. KPIs covered environmental and social factors such as water leakage, supply interruptions, carbon reduction, biodiversity and affordability.

Adaptation measures can sometimes have adverse human rights impacts. For instance, building a hydroelectric dam to regulate floods in lowlands might be effective in reducing the hazards resulting from floods. However, it may simultaneously restrict access to land and forest resources for people upstream. Our Environmental and Social Risk (ESR) policy framework and human rights policy consider a variety of human rights risks when assessing corporate clients and transactions. We recognise that as new adaptation technologies and practices develop, we need to continuously examine the potential adverse human rights impacts. For more information, read our stance on human rights.

Thought leadership

We aim to improve our understanding of what defines an effective adaptation solution. We closely follow existing guidance on financing climate adaptation, such as the EU taxonomy. However, we also note that unlike mitigation, there are no standard definitions or metrics of what counts as adaptation, as it depends on climate change scenarios and location-specific risk tolerance. To this end, we are a member of the currently active climate adaptation target setting working group, launched in 2023 by UNEP FI, to develop a set of impact guidelines and complement net-zero alignment under the responsible banking framework.