It must have been a weird couple of weeks for the ING climate team.
On 25 March, the Dutch lender became the “first global systematically important bank with a validated science-based target”.
Four days later, Friends of the Earth showed up with 10,000 pages of “evidence” at ING headquarters, formally launching a climate case against the group that had been telegraphed for the better part of the past year. (ING has published a detailed history of and response to the case on its website.)
I wrote the first op-ed of this series about “Linkedin whiplash” exactly one year ago. Well, talk about whiplash!
The juxtaposition between these two announcements in one week is obviously particularly striking. But it is not just a curious coincidence. It is symbolic of the end of an era, the post-Paris Agreement consensus between NGOs and the private sector.
The best way to understand non-profit target-setting or sustainability commitment frameworks is transactional. A financial institution gets to use the panda logo or that of some other NGO (SBTi) in exchange for following a specific course of action. It also implicitly “buys” some level of protection against negative advocacy campaigns.
One can debate the appropriate exchange rate for this transaction (and indeed, at least in part because of disagreements as to that exchange rate, we withdrew from the SBTi financial sector process in 2020). That exchange rate may fluctuate over time. The level of protection against advocacy may change. But the core rules of the game were clear.
No more! ING now has the somewhat curious position of being both the first SBTi bank and exposed to arguably the most significant (and definitely best-funded) climate case against any financial institution, anywhere in the world.
So what is the lesson for investors?
That it is not just politicians who are cancelling the post-Paris Agreement social and political contract. It is also NGOs.
NGOs have always run an insider-outsider strategy. But the idea that a company with science-based targets would be the primary target of a climate lawsuit would have seemed absurd in the past.
In December, advisory board members of the Glasgow Financial Alliance for Net Zero (GFANZ) received an email from NGOs suggesting that the alliance should remove certain US banks from the initiative. Well, they got their wish, I suppose. I admit I did not see any victory laps from NGOs, but perhaps I missed them.
The message of outsider NGOs to investors and banks is, there is no safe haven. It doesn’t matter if you are part of a net-zero initiative or the SBTi or any other initiative for that matter. Everyone is free game… for a negative campaign!
Investors have spent the past five years saying to NGOs: “I’ll give you all I got to give if you say you’ll love me too.” Well, NGOs are no longer saying: “I’ll love you too.” You can’t buy me love, investors!
This raises some stark and troubling questions. If voluntary sustainability commitments are not a reputational shield, what purpose do they serve?
I can imagine NGOs’ response – of course, voluntary sustainability commitments can be a shield. If they are aligned with the criteria we define!
The insider-outsider NGO strategy has always been predicated on gradients of ambition. But if ING won’t meet the criteria, I don’t know many (any?) mainstream banks that would. And if (from the vantage point of advocacy NGOs) “second best” ambition doesn’t count for anything, it raises the obvious question: what is the point of “second best”?
Note that “second best” in this case are the criteria of the SBTi that currently exactly one mainstream bank has signed up to.
How can a sustainability professional sell voluntary commitments internally if the terms of the deal are not what they once were?
We are nearing the point where setting public climate targets is just a headache. NGOs will bash you for not being ambitious enough. They may still choose to sue you. If you miss your target, they will bash you for missing them. And meanwhile you have the counter-reformation movement in the US doing their best imitation of the Spanish Inquisition.
I realise I write this from the vantage point of running an “insider NGO”. I confess my biases. I just struggle to put myself in the shoes of a CSO and being able to convince myself – not to mention my board – that voluntary targets in 2025 are a value-generating proposition.
Maybe this is what outsider NGOs are hoping to achieve. Disillusioned by climate target-setting frameworks, they may see these voluntary commitments as dead ends, and so eliminating them just eliminates greenwashing. In which case, you’re doing a good job disincentivising them!
Or maybe the strategy has a more prosaic motive, driven by their own survival instincts as philanthropic funding evolves and outsider strategies are proving the best avenue for fundraising (I can speak from experience here).
Whatever the rationale – and I am willing to concede that I may be too narrow-minded or short-sighted to see the bigger picture – the key implication for investors needs to be clear. Anything short of full compliance with outsider NGO demands can expose you to a full court press.
The silver lining? Maybe the post-Paris Agreement consensus wasn’t that great to begin with. The past weeks and months have not just revealed the cracks in the insider-outsider NGO coalition. They have also revealed the cracks in the target-setting frameworks.
NGOs breaking the post-Paris Agreement consensus may give more space to the one question that was perhaps most ignored in the fervour of target-setting post-Paris (and pre- and post-Glasgow): why?
Why should an investor set a voluntary target?
To answer the why, one has to evaluate what the institution stands to benefit and to lose. What is the right ambition level? What does the investor anticipate the future will look like and how is it best positioned to weather not just the short-term political vagaries, but also the long-term fundamentals?
All questions that got too short shrift in years past. Recentring these questions may lead some (many?) institutions to exit the target-setting game. But perhaps they can be the foundation of target-setting 2.0, built on foundations that survive not just this decade but also the next, and can motivate investors and companies to play their part.
Jakob Thomä is co-founder of Theia Finance Labs (formerly Two Degrees Investing Initiative), research director at Inevitable Policy Response and professor in practice at University of London SOAS.
Disclosure of potential conflicts of interest: ING is a member of Theia Finance Labs and provides an annual membership contribution. ING funding represented less than 3 percent of Theia Finance Labs income in 2024.
