ING Groep NV plans to reduce financing to the upstream oil and gas sector by 19% by 2040, compared to 2019 levels, as part of its new target under its climate policy.

The Netherlands-based bank included the sector in its Terra progress report for the first time as it aims to align its €600 billion lending book with the well-below 2 degrees Celsius climate target of the 2015 Paris Agreement on climate change.

The Terra method was created in collaboration with global think tank 2˚ Investing Initiative in 2018 to assess whether ING's lending portfolio is helping to combat climate change.

The progress report presented the bank's pathway towards climate alignment in sectors most responsible for climate change, such as fossil fuels, shipping, cement, steel and residential and commercial real estate.

The report showed that the power generation sector, which was responsible for 41% of all energy-related carbon dioxide emissions in 2019, has the biggest improvement among the nine sectors in the bank's portfolio as it is 14.9% below the targeted pathway. The bank also increased its renewable power generation financing by €1.9 billion and reduced direct exposure to coal-fired power plants by 22% in 2019.

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The bank said it will align its portfolio to climate targets by decreasing its lending exposure and engaging with clients to facilitate their transition to low-carbon technologies while it steers its client base and lending exposure toward low-emissions leaders.