09-09-2021 12:41

Increasing pressure on fossil fuel sector with updated policy

The path to a sustainable future is more important and urgent than ever and Nordea is supporting companies in the energy sector who are willing to make the transformation.
Ylva Hannestad
Ylva Hannestad, Deputy Head of Group Sustainability, Nordea.

Nordea has also updated the bank’s fossil fuel policy, implementing its 2030 and 2050 objectives with clear requirements and recommendations for the sector. In addition, Nordea is also working on setting targets for the most climate vulnerable sectors and several sector targets that will be published in 2022.

“The goal is clear. Nordea is committed to becoming a net-zero emissions bank by 2050 at the latest and with a tangible mid-term target by 2030 to reduce carbon emissions from our lending and investment portfolios by 40-50%. We are driving for a transformation and have now set several phase-out policies for the most climate vulnerable sectors,” says Ylva Hannestad, Deputy Head of Group Sustainability at Nordea.

The new fossil fuel policy includes:

  • Nordea does not start any new financing relationships with companies using thermal coal in power production or mining in line with international recommendations. Nordea will divest existing customers unless they shift from these operations by 2030 for industrialised countries and 2040 globally.
  • Nordea does not finance or refinance projects such as pipeline infrastructure or companies that remain active in expanding unconventional oil and gas. Nordea will divest existing customers unless they shift from these operations by 2026 as the loan period is often about five years which means that 2026 is the soonest reasonable time.
  • Nordea does not start any new financing relationships with companies drilling for oil and gas in the most sensitive and vulnerable parts of the Arctic region. Nordea will divest existing customers unless they shift from these operations by 2023.

How do you view investments in and lending to the fossil energy sector?

“Transitioning the fossil energy sector is key. It is widely concluded that it is the transitioning of the energy sector that needs to happen if we are to reach the Paris Agreement goals. Therefore, as a financial institution, we need to take responsibility for that and help this sector in the transformation.” 

“Our view is that we will have the most positive impact by doing this together with our customers by engaging, supporting and challenging them to set a transition plan with ambitious targets. We firmly believe that this is achievable and that customers also in vulnerable sectors will understand the need to progressively change.”

You don’t have a phase-out policy for conventional oil and gas. Why don’t you just leave this sector altogether?

“For all fossil fuel corporates we recommend a commitment to net zero emissions across emission scopes by 2050 at the latest and interim targets on how to get there so that there is a base in climate science. However, exclusion in itself from Nordea does not solve the problem with the companies’ emissions, and we don’t have time to hope that someone else will take the responsibility to fix it.”

“It is important to remember that today fossil energy is still a large part of the energy mix on which the world depends, which makes this a complex issue. Not only are we still very dependent on fossil energy, the companies being the current providers of it have important infrastructure and components for the future energy systems and distribution, which makes them important for the transition. Therefore, we need to assess companies on the basis of the opportunities and commitments they have taken to transition their operations, in accordance with expectations in the Paris Agreement.”

“However, should we not see any ambition to change at a company, then exclusion is strongly considered.”

What is your view on the increased focus and debate on the topic?

“We strongly welcome that the topic is being prioritised by different organisations and companies in the field. It is important to remember that sustainability is a broad and complex topic. Progress is being made fast. However, there are still many challenges to consider, such as accessibility to good data.”

Nordea still has investments in fossil energy companies. What can you say about these companies?

“Many of these are on our Paris-Aligned Fossil Fuel list. This means that the companies all have their own transition strategy that is compatible with being well below the two-degree goal, which in practice means that they are phasing out the use of coal quickly enough.”