Rabobank’s Climate Plan 2022 summarized

While our efforts in sustainability areas such as biodiversity and nitrogen deposits in the Netherlands are among our key priorities, our climate plan we call ‘Our Road to Paris report’ focuses on our work on climate change. It builds on our previous disclosures in our 2020 Climate Report, and complements our 2021 Impact Report and our 2021 Taskforce on Climate Related Financial Disclosures (TCFD) disclosure, both of which were published in 2022.

Climate change threatens human communities and natural ecosystems all over the world. We clearly recognize the gravity of the situation and are fully committed to supporting the goals of the Paris Climate Agreement. We look at climate change through the lens of "double materiality." On the one hand, we see that the aggregate GHG emissions and removals linked to our own operations and those of our customers have a negative impact on the climate. We rapidly need to reduce our climate impact to get it in line with pathways limiting global warming to 1.5°C. We call this process “Paris Alignment.” On the other hand, we see that climate change increases the risk of financial and economic instability for many of our customers. We need to integrate these risks into our risk management models and processes. We call this Climate Risk Management.

Our Paris Alignment process is focused on delivering on our commitment to transition all operational and attributable GHG emissions from our lending and investment portfolios to align with 1.5°C pathways by mid-century or sooner, including CO2 emissions reaching net-zero at the latest by 2050, consistent with a maximum temperature rise of 1.5°C above pre- industrial levels by 2100. Our approach will take into account the best available scientific knowledge, including the findings of the Intergovernmental Panel on Climate Change (IPCC), and we commit to reviewing and (if necessary) revising our targets at least every five years after the target is set.

Earlier in 2022, we disclosed the GHG emissions of our own operations (0.058 Mt CO2e) as well as our customer’s emissions, which is 85% of our material on-balance sheet climate-related lending activities (46.3 Mt CO2e; ed.: as formulated in our climate plan, with more details to be found in the plan and updates in our impact reports, soonest update expected in our Impact Report 2023). In this climate plan, we take a further step towards realizing our commitment by disclosing reduction targets and transition plans for our own operational emissions and for ‘financed emissions’ from 12 sector/region combinations accounting for approximately 70% of our climate-material loan portfolio at that time.

Since 2018 we have significantly reduced our operational GHG emissions. And we have been offsetting our residual emissions through different types of ‘carbon credits’ since 2007. The majority of our operational GHG emissions fall under three categories: the use of electricity, heating, cooling, and natural gas in our offices; business-related travel by car and business-related travel by plane. We have set emission reduction targets for 2030 for each of these categories. We have made our offices more energy efficient, our lease car fleet cleaner, and changed the way we travel and how often we do so. We have used science-based benchmark decarbonization pathways for the three main emissions categories.

Currently*, our emissions fall well within these intensity reduction pathways. In order to stay on this track, we have set interim reduction targets for the emissions emanating from our activities in the Netherlands; see our climate plan for more details.

We are also updating our policy on the use of carbon credits to offset our own emissions. In our view, carbon credits can be used to offset emissions only if the offset is credible, which means it must be real, additional and, ultimately, permanent.

Our first steps towards Paris Alignment focus on 12 high-emitting sector/regions. At the time we published our climate plan, these sectors together accounted for 70% of our material climate-related on-balance sheet loans and more than half of the financed emissions we disclosed in our 2021 Impact Report (26.9 of 46.3 Mt CO) which we will update regularly.

We have split our portfolio in line with the two key strategic transitions related to our climate impact strategy: the Energy Transition and the Food System Transition. We have grouped high-emitting sectors where the GHG emissions sources are primarily linked to fossil fuels under the Energy Transition. The Food System Transition sector covers sectors where the emissions are primarily biogenic, that is related to biological processes as opposed to the burning of fossil fuels for energy.

At the time we published our climate plan, of the four Energy Transition sector/region combinations, three had average emissions intensities that are compatible with 1.5°C pathways, but continuing reductions are needed. In 2020, the majority of our climate-material exposure is in our residential and commercial real estate activities (58% of total). Together, these combinations account for 2.4 Mt CO, or roughly 10% of the financed emissions. On the positive side, our International Energy portfolio is primarily composed of project financing for renewable energy projects, which resulted in 5.6 Mt CO in avoided emissions in 2020.

As GHG emissions accounting and emissions reduction pathways for agriculture are still in the developmental stage, in terms of our Food System Transition sector/region combinations, we have split our portfolio into Dutch and international sectors. Based on the targets the Dutch government has set*, we were able to determine absolute emissions reduction pathways for three high-emitting sectors in our Dutch F&A portfolio: Dairy, Greenhouse Horticulture, and Pig Farming. The targets the Dutch government has set, are preliminary, they could potentially change both in height and in scope (e.g. to include Land Use Conversion). Once final, we will investigate the impact of any changes on our own targets. We were unable to identify suitable decarbonization pathways for our DLL tractor portfolio, but we have included it in this report with an initial target based on preliminary internal estimates*.

We have used the SBTi FLAG tool to derive emissions intensity reduction pathways for four sector/region combinations (one high-emitting sector in each of the largest regions in our international portfolio). Although we do not yet have sufficient data to calculate the emissions intensity of our portfolio for these combinations, we have decided to use the default reduction pathways to set preliminary targets. We will finalize these targets as soon as data and methodologies allow.

Due to these constraints, our 2030 intermediate targets are a combination of absolute emissions reduction targets and physical intensity reduction targets. We prefer to work with emissions intensity reduction targets (in line with Net-Zero Banking Alliance (NZBA) guidance) where possible, as they account for both portfolio growth and emissions reductions in the given sector/region combinations.

Our plans to achieve our Paris Alignment targets use interventions at three different levels:

1. Customer Level: helping customers transition to a low-carbon future. We do this by providing our customers with knowledge and insights into how they can decarbonize their activities, financial products to support their transition, and financing for new innovations that will accelerate their efforts.
2. System/Economy Level: helping move the system to a low-carbon future. The transition to a sustainable economy requires systemic change. We support this by engaging with stakeholders at different levels in the economy and society.
3. Portfolio Level: optimizing our portfolio for sustainability. Even though our focus is on helping our customers and their sectors transition to a low-carbon future, we also make conscious choices about growing our portfolio sustainably.

At the same time, we must stress that we cannot meet these targets on our own. Even though we have direct control and a clear idea of how to reduce our own emissions, when it comes to the emissions of our customers, we have to rely to a significant degree on the efforts of others, including, but not limited to, our customers themselves.

Furthermore, we are still dealing with many uncertainties. For instance, we do not yet know the actual emissions of our F&A customers, our homeowners, or our small business customers, which means that for now, we are using model-based estimates to set our targets. In the F&A sector (on subsector-level), there are also open questions regarding national reduction targets and residual emissions that need to be answered*. As a result of these limitations, the targets and associated reduction plans we present in the climate plan are neither perfect nor final. They carry inherent uncertainties and will have to be updated in future iterations of the plan, as more information becomes available. Nevertheless, we believe that setting targets and disclosing our current plans now provides direction, and that it will help us progress down our Road to Paris.

*Note: this article is part of the management summary of the climate plan ‘Our road to Paris report’ dated November 2022. In the meantime, insights and amounts might have changed. These will most often be transparently shared in later reports such as in our Impact Report 2022.