By Deia Markova, Head of Trade Commodity Finance and ESG Ambassador for Societe Generale in Switzerland
We are witnessing a historical shift, from a fuel-intensive to a material–intensive energy system. The technologies, essential for the energy transition, are mineral intensive, requiring large amounts of base and niche metals. For example, an electric car requires 6 times the mineral inputs of a conventional car and an onshore wind plant requires 9 times more mineral resources than a gas-fired plant. At the same time, the net-zero commitments are outpacing the formation of supply chains, market mechanisms, financing models and other solutions needed to smooth the world’s decarbonisation pathway. The metal and mineral sector will be put under test. It will have to provide numerous raw materials required for the energy transition, adapt to new technologies and decarbonise its own operations, all at the same time. Solutions are complex and the banks’ role is to co-construct those with clients and partners.
The importance of transparency
By joining the Net Zero Banking Alliance of the UNEP-FI as a founding member, Societe Generale undertakes to align portfolios with trajectories aiming at carbon neutrality by 2050. We also participate in international coalitions to define common standards for the implementation of these trajectories- such as the Steel Climate-Aligned Finance Working Group. Allow me to give you a concrete example of a great innovation to support these ambitious objectives. Societe Generale Trade Commodity Finance in Switzerland works together with Carbon Chain and several clients, using big data and machine learning technologies to measure the GHG emissions of selected trade flows thanks to a mapping of the full supply chain. We tested the tool on different materials such as copper, zinc, lead, aluminium and throughout many geographies. This mapping gives a better understanding and transparency of where the client’s business stands in terms of carbon footprint at each step of a transaction (in the warehouse, on the ship…). It also creates the necessary auditability level and the ability to compare to benchmarks. We started this project as we lacked the data, we needed to analyse our trade loan portfolio’s emissions. Today, we can put a hard figure on GHG emissions and set-up KPIs to incentivise their reduction on supply chains we finance around the world.
Technological innovation will be an important lever to facilitate reduction of the carbon footprint in operations
Deia Markova, Head of Trade Commodity Finance and ESG Ambassador for Societe Generale in Switzerland
This is an important step in a context where one of the challenges of the sector laying ahead is the reshaping of supply chains due to end-user change of behaviour. Because of the specific requirements of a number of decarbonising technologies and the strict GHG emissions reduction targets from end-user sectors, a number of metals will become less commoditised, and their marketing / sales will change. Looking further ahead, technological innovation will also be an important lever both to enable growth of the sector and to facilitate reduction of the carbon footprint in operations.
