The NGO BankTrack has released a report on Nordic banks’ lending and investments in fossil fuel companies. Nordea is mentioned in connection with companies in the report but is also highlighted as one of the main banks behind the decreasing trend in oil and gas financing and investments that has taken place since 2016.
“We welcome this report and that this topic is addressed,” says Anne Schult Ulriksen, Head of ESG in Large Corporates & Institutions (LC&I).
“As mentioned in the report, Nordea is one of the main banks that has reduced its financing to oil and gas the most. Since the end of 2019, Nordea has reduced its financing of oil, gas and offshore activities by more than 70%. The small portfolio of companies in this sector that we still finance is governed by some of the strictest regulatory frameworks. These companies also play an important role in ensuring a stable energy supply in our neighbouring region, not least in turbulent times like these with Europe facing an energy crisis. Unfortunately, the transition to a fully sustainable energy system will take time. That said, we try to encourage a transition away from fossil fuels and towards renewables instead. Some of the companies mentioned in the report are leaders in their sector when it comes to investing in low-carbon technologies and renewable energy.”
Eric Pedersen, Head of Responsible Investments, Nordea Asset Management, adds:
“It’s important to remember that the energy market is facing a number of challenges, both in the short- and long-term perspective, and that the transition away from fossil fuels is unfortunately not possible from one day to the next. For now, even the most ambitious of energy utilities depends in part on fossil fuels – and simply excluding these companies for that reason would mean giving up any opportunity for real-world impact. This is why we combine the tools of engagement and exclusion.”
Nordea has made it clear that we expect companies to reduce their emissions and have a transition plan. We believe in being an active bank and a driving force in the transition to a sustainable future in line with the Paris Agreement. Nordea has set several concrete targets in this area. For example, Nordea was the first Nordic bank with a tangible mid-term target by 2030 to reduce absolute carbon emissions by 40-50% across our lending and investment portfolios. Nordea is also in the process of setting further sector-based targets as part of its Net Zero Banking Alliance commitment.
Why does Nordea, according to the report, still invest in coal and fossil companies?
“Nordea excludes all companies if more than 5% of their turnover is generated from thermal coal extraction. We do not agree with the report’s classification of electricity utilities as coal companies. One example of this is Enel, which is widely regarded as one of the world’s most progressive energy companies. Enel’s share of renewables in electricity generation has steadily increased over the years, and the company expects to reach its target of an 80% reduction in direct GHG emissions by 2030 compared to 2017 levels, in line with the 1.5°C scenario, and certified by the Science-Based Targets Initiative. Given this, we regard Enel and companies like it as exactly the kind we should support to create real-world decarbonisation,” says Eric Pedersen.
Nordea has invested in companies that haven’t come as far as Enel, what do you say about them?
“We believe in being an active bank, with demands on both the customers and companies we invest in, in order to be a driving force in the transition. Companies that haven’t come as far as Enel may be excluded from the majority of our funds and will be subject to active engagement where we still have business or investments. Should we not see any ambition from the company to change, then exclusion can be the result,” says Eric Pedersen.
In what way do you engage with the companies?
“By supporting our customers we want to be a driving force in the transition. The report doesn’t assess what plans and targets the companies have for transitioning in line with the Paris Agreement. Nordea is part of several collaborations and initiatives for active ownership. For example, Nordea is part of Climate Action 100+, one of the most well-known investor-led initiatives, which we have participated in since the start of 2017. In 2021 Nordea voted in more than 4,200 annual general meetings, which is around 95% of all AGMs/EGMs (extraordinary general meetings) in which Nordea had the opportunity to vote. Nordea voted more or less for every ESG proposal. This is more than any other large Nordic bank,” says Eric Pedersen.