Six international banks - Citi, Crédit Agricole CIB, ING, Standard Chartered, Société Générale and UniCredit - have signed up to an agreement to measure and disclose their steel-related loan emissions via the Sustainable STEEL Principles (SSP), the first climate-aligned finance agreement for the steel industry.

But while the banks must apply the principles to a broad range of financial products, their application to letters of credit (L/Cs), bank guarantees and factoring programmes is voluntary.

Outline scope

The principles provide a methodology for banks to measure and report the emissions associated with their loan portfolios compared to net-zero emissions pathways. In doing so, the framework informs banks of how emissions-intensive their steel loans are relative to the net-zero pathway needed to stay within the planet's remaining carbon budget - a metric known as climate alignment.

The SSP is led by the independent non-profit, RMI. Its aim is to transform global energy systems through market-driven solutions to secure a clean, prosperous and zero-carbon future.

Voluntary L/C application

The principles apply to several financial products, including asset finance, bridge loans, buyer credits, export finance, revolving credit facilities and loans, term loans and working capital facilities.

RMI has not disclosed why the measurement and disclosure of L/Cs, bank guarantees and factoring programmes are voluntary.

Reporting obligations

All participating banks have agreed to start recording and reporting emissions data from next year and disclose how far steel sector borrowers are on target to reach net zero emissions by 2050.

Whichever voluntary products a signatory elects to report on must be recorded and reported consistently throughout all portfolio calculations according to RMI. A list of included products must be disclosed annually to the secretariat, which for the time being at least is RMI's centre for climate-aligned finance.

The Sustainable STEEL Principles can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.