Annelieke Mooij, Assistant Professor, Tilburg University

Photo credit: Sandro Halank, via Wikimedia Commons

The Dutch environmental organization “milieudefensie” threatened legal action against ING bank in the Netherlands. On February 14, 2024, ING declared it wouldn’t yield to the organization’s demands, making a lawsuit highly probable. While seemingly a domestic issue, this case could have significant European implications, particularly for the Monetary Union and the European Central Bank’s (ECB) independence.

Milieudefensie v. ING

The environmental organization (plaintiff) is requesting the court to mandate that ING take four concrete actions: align its climate strategy with the Paris Agreement’s 1.5C target; reduce its own emissions (48% CO2 and 42% CO2e) by 2030; cease financing major clients with negative environmental impacts; and engage in discussions with the plaintiff on implementing these demands. These are serious requests, raising questions about their likelihood of success in court.

The plaintiff will likely reference two previous cases. The first is the Urgenda case, where the Dutch Supreme Court ruled that the state must adhere to Paris Agreement emission reduction targets, setting a precedent for climate responsibility.

The second case, Milieudefensie v. Shell, established that Royal Dutch Shell is accountable for reducing emissions from its global operations (45% by 2030 compared to 2019). This groundbreaking case acknowledged a legal entity’s climate obligations based on an unwritten duty of care derived from Dutch tort law. While this strengthens the case against ING, two obstacles remain.

The first challenge concerns the influence of ING’s financial services on its clients. While the court ruled that RDS could influence its group’s policies, it’s debatable how much sway a bank has over its clients’ actions, even though they can refuse loans for environmentally harmful activities and promote green investments. Demanding a complete halt to financing clients lacking climate plans might be considered a broad interpretation of the duty of care, particularly since the court must weigh environmental concerns against business rights.

Secondly, unlike RDS’s direct emissions, ING’s impact is indirectly linked to a diverse investment portfolio. As ING stated, solely focusing on emissions might be counterproductive. For instance, increased investment in heat pumps, while increasing ING’s emission portfolio, could lower global emissions. This differs from the Shell case, where shifting from fossil fuels to renewable energy directly contributed to emissions reduction. This complexity forces the court to decide between an overarching emission reduction, potentially environmentally detrimental, or a “best-in-class” approach focusing on the most sustainable options within specific sectors. This could lead the court to define methods for achieving emission reductions, a departure from previous cases. Such a decision could impact the ECB’s future purchasing programs.

Impact on the Monetary Union

The right to life (including a healthy environment), enshrined in the European Convention on Human Rights (ECHR), played a crucial role in these cases. This is relevant because the EU Charter considers the ECHR the minimum protection standard. Judgments across EU members indicating common ground on environmental protection leave less leeway for individual interpretations. While the Urgenda case directly invoked human rights, the Shell case, like the potential ING case, applied them indirectly, making it harder to establish a clear common ground. However, the Shell case referencing the UN Guiding Principles strengthens the case for recognizing legal entities’ environmental obligations. This is particularly relevant for the ECB.

While the ECB’s primary mandate is price stability, its secondary mandate includes contributing to sustainable development. This implies considering environmental goals when feasible without compromising price stability. Notably, the ECB recognizes its commitment to the Paris Agreement and the EU Charter of Fundamental Rights. However, the extent of its responsibility in fulfilling climate obligations within its corporate funding programs remains unclear. The ING case could offer clarity regarding the balance between banks’ environmental obligations and their operational rights, potentially influencing the ECB’s approach.

The ING case highlights the need to consider human rights, including climate change and economic needs, in policy decisions. While not immediately binding, a ruling against ING could establish a framework for balancing these interests, especially if upheld by the ECtHR. Despite the road ahead, this case represents a significant step towards clarifying climate responsibilities within the European financial landscape.