EU legislation aiming to foster sustainable corporate behaviour (notably the Corporate Sustainability Due Diligence Directive (CSDDD)) compels large European corporations to adopt and put into effect climate transition plans. The banks among these corporations face a similar obligation under the EU’s prudential supervision framework. This dual demand raises the question what requirements a climate transition plan of a bank should meet. This question has been put in sharp relief by climate litigation initiated against ING Group by Friends of the Earth Netherlands (Milieudefensie). The NGO argues that ING’s climate transition plan is insufficient to address its significant contribution to climate change, thereby violating the bank’s duty of care under the Dutch Civil Code. This paper argues that requirements can be derived from the systemic role of banks as ‘universal owners’, providing financial services across the economy. Combined with norms found in EU regulation and international standards, this provides sufficient grounds to determine what constitutes proper emission reduction targets in banks’ climate transition plans. Concretely, we argue that large, diversified banks in industrialized countries should set (1) absolute reduction targets that (2) minimally align with the global average reduction needed to achieve the 1.5°C climate goal of the Paris Agreement.
European Company Law