Source of Emissions

Emissions come from four main sectors - transport, buildings, industry and agriculture –that utilize different equipment and devices that are powered by different sources of fuel.  The infographic below depicts how different emissions get produced.

Ando’s 3 Main Strategies to Reduce Emissions

Ando’s approach to reducing emissions is based on the approach laid out in the European Union Technical Expert Group on Sustainable Finance Taxonomy Technical report (“Taxonomy Report”).  The report lays out 8 different “economic activities” that contribute substantially to reducing emissions.  We have included them in Appendix A.   

These eight different activities can be summarized into three initiatives.  First, to shift more energy sourced to renewables (wind, solar, etc.).  Second, to make investments in the four main sectors to either reduce energy consumption, support the utilization of renewable power, or reduce emissions.  The third initiative is to support the sequestration of emissions which are already in the atmosphere. 

#1 Shift to Renewable Energy

Renewable energy is growing, but this growth has so far been too low to offset the growth in fossil energy consumption. 

Our goal is to accelerate the investment in a variety of different renewable energy sources from wind, solar, hydro, and geothermal. It also includes storing renewable energy and investments necessary to deliver the energy through the grid. Below is a graph that represents how different energy sources can displace current energy sources.   

#2 Support Emission Reductions in Buildings, Industry, Transportation and Agriculture

Global fossil CO2 emissions by sector are dominated by electricity, heat & energy (45%), industry (23%), and national transport (19%). International aviation and marine bunkers are 3.5% and remaining sectors 10%.

#3 Support carbon sequestration.

Decreasing the amount of greenhouse gas (GHG) emissions at the source are the focus of initiatives #1 and #2.  Initiative #3 is about removing GHG which have been previously generated and have now accumulated in the atmosphere.   

Our goal is to support loans and securities which are utilized to remove GHG from the atmosphere. These are often referred to as negative emission technologies and include air carbon capture, soil carbon sequestration, afforestation, and reforestation.   

Guiding Principles of Allocating Deposits to Reduce Emissions

Our methodology for selecting where to allocate customer deposits within the three categories identified above is driven by the following guiding principles.  

Appendix A

The EU Technical Expert Group on Sustainable Finance published a Taxonomy Technical Report in June 2019 that, among other things, defined eight economic activities that substantially reduce emissions.  The following are excerpts from the Taxonomy Report.   

“An economic activity shall be considered to contribute substantially to climate change mitigation where that activity substantially contributes to the stabilization of greenhouse gas concentrations in the atmosphere at a level which prevents dangerous anthropogenic interference with the climate system by avoiding or reducing greenhouse gas emissions or enhancing greenhouse gas removals through any of the following means, including through process or product innovation: 

• a) generating, storing or using renewable energy or climate-neutral energy (including carbon-neutral energy), including through using innovative technology with a potential for significant future savings or through necessary reinforcement of the grid; 

• b) improving energy efficiency; 

• c) increasing clean or climate-neutral mobility; 

• d) switching to use of renewable materials; 

• e) increasing carbon capture and storage use; 

• f) phasing out anthropogenic emissions of greenhouse gases, including from fossil fuels; 

• g) establishing energy infrastructure required for enabling decarbonization of energy systems; 

• h) producing clean and efficient fuels from renewable or carbon-neutral sources.” 

The Taxonomy Report also describes how it is important to fund activities that enable a transition to a net-zero economy. 

“The transition to a net-zero emissions economy requires a shift from high emitting activities or modes of production to low emitting activities or modes of production. To achieve this, it is necessary to incentivize the growth of zero carbon and sequestration activities. 

• 1) Activities that are already low carbon (i.e. activities associated with sequestration or very low and zero emissions). These activities require capital to increase their development and wider deployment. The technical screening criteria for these activities are likely to be stable and long-term. These are ‘green’ activities. 

• 2) Activities that contribute to a transition to a net-zero emissions economy in 2050 but are not currently close to a net-zero carbon emissions level. These activities are critical to the economy but must significantly enhance their performance beyond the industry average, without lock-in to carbon intensive assets or processes. The technical screening criteria for these activities will be subject to regular revision, approaching zero over time. These are ‘greening of’ activities. 

• 3) Activities that enable low carbon performance or enable substantial emissions reductions. These are ‘greening by’ activities.” 

The Taxonomy Report also identifies activities that can substantially reduce emissions, broken out by sector.  We incorporate these activities in Ando’s approach.