During the recent NYC Climate Week and under the leadership of RMI, six global banks with almost $23 billion in related loan exposure announced their commitments to the Sustainable STEEL Principles, committing to adopt a common measurement and disclosure framework to support the steel industry in forging a pathway to net-zero carbon emissions.
Modeled on the international shipping industry’s Poseidon Principles framework,1 the Sustainable STEEL Principles framework (Framework) has it signatories commit to following certain climate-related principles. The Framework has five principles, which are intended to provide lenders with the tools necessary to advance the decarbonization of the steel sector:
- Standardized assessment
- Transparent reporting
These principles are described in more detail in The Sustainable STEEL Principles, a 69-page guide for banks on how to effectively assess and disclose the climate alignment of steel finance portfolios.
The Framework’s working group notes that “[s]teel is an emissions-intensive sector, accounting for roughly 7% of global greenhouse gas emissions (GHGs), with demand projected to grow 30% by 2050. In order to avoid carbon lock-in, the decarbonization of this hard-to-abate sector is both demanding and urgent” and that “[s]teel is a critical material, essential to the functioning of the global economy, from the production of the world’s vehicles and household appliances to its buildings and infrastructure. Due to the sector’s reliance on coal, it is also the largest source of industrial CO2 emissions. As a result, decarbonizing this sector is simultaneously one of the greatest challenges and opportunities of our time.”
1 See our related June 19, 2019, Legal Update “International Shipping Finance Goes Green.”