Engaging to understand

At Nordea, we are committed to sustainable business and development by combining financial performance with environmental and social responsibility as well as sound governance practices. 

We work to engage with customers on environmental, social and governance matters and to have an understanding of the challenges and opportunities faced by customers in their businesses and industries. It is also important for us to integrate ESG assessments into our risk management and due diligence processes and ensure that we never inadvertently support financial crime. 

With respect to financing in our Sustainability Policy we commit to:

  • engaging with customers on environmental, social and governance matters and having an understanding of the challenges and opportunities they face in their businesses and industries.
  • including and integrating environmental, social and governance risk assessments into risk management and due diligence processes.
  • developing and supplying financial products that support sustainable development.
  • engaging with stakeholders to ensure continuous development and performance in financing activities.
  • preventing financial crime and including measures to manage these risks in financing activities.
  • engaging in analysing the potential risk elements in connection with financing that could cause reputational damage to Nordea. Equally we expect that customers and stakeholders themselves engage in managing their reputational risk.
  • high standards and best practices as regards tax compliance and reporting, and not financing or facilitating tax schemes that are considered tax evasion, or which, although considered legal, are perceived as aggressive tax planning or are otherwise not aligned with Nordea’s internal ethical standards.

An overview of sustainability in the credit process

Nordea’s Code of Conduct describes the high-level ethical principles that guide our business and includes aspects such as care for the environment, labour rights, how we treat our customers, commitment to human rights, the right to privacy, and anti-bribery and corruption. The Code of Conduct is a central steering document for our financing operations together with our principles on ESG in financing, investing and advice in our sustainability policy. The impact of ESG risks is taken into account in our credit decision-making, including escalation to credit committees as determined by Nordea’s governance. 

Nordea regularly performs ESG risk analysis on large corporate customers to manage ESG-related risks and opportunities. For these customers we have a dedicated team of ESG analysts who use a specific ESG tool and methodology to analyse the corporations. Large customers with high ESG risk are escalated to our Executive Credit Committee, which is chaired by the Head of Group Credit Risk Management. Decisions taken in the Executive Credit Committee are reported to the Board. 

We are currently looking into how we can enhance the integration of ESG in relation to our small and medium-sized corporate customers. For these clients, environmental and in some cases also social and political aspects are currently considered in credit decisions, where relevant. ESG matters are integrated into the standard escalation process, as set forth in our credit risk framework. Credit decisions are handled on a case by case basis by local management but can, according to our escalation process, be elevated to the Business Banking Business Risk Forum, Business Banking Business Ethics and Values Committee and finally also to the Business Ethics and Values Committee at Group level for a recommendation on how to handle a potential ESG risk.  

Read more about green financing on our Sustainable Choice page.

Applying the Equator Principles

The Equator Principles is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects. Nordea adopted the Equator Principles (EP) in 2007. Our analysts and other relevant staff have been trained in Nordea’s internal EP process.

The ten principles contained in the EP are organised into five workflow steps:

  1. Initial project review
  2. Project appraisal
  3. Project negotiation, commitment
  4. Monitoring
  5. External reporting

Nordea evaluates the borrower’s capacity to adequately identify, prevent, mitigate and manage key environmental and social risks and impacts of the project based on documentation provided by the borrower, independent environmental and social consultants and in certain cases site visits.

The relevant business units in Large Corporates & Institutions include ESG matters in the initial business selection discussions. The detailed project appraisal and internal EP reviews are carried out by EP reviewers within Large Corporates & Institutions. These persons have relevant education and broad working experience to support performing the task. The EP reviewer also proposes conditions related to environmental and social issues for loan agreements when necessary, participates in drafting the scope of work for independent consultants, communicates with other relevant project parties and monitors project compliance with EP. In the above tasks the EP reviewer co-operates with the rest of Nordea's deal team responsible for the financing of the transaction in question.

The EP reviewer presents the EP transactions to Nordea's EP Advisory Group (EPAG), which either supports or does not support the transaction based on EP compliance. The EPAG has 4-6 members who are senior managers from relevant business and risk management units. EPAG's statements are included in the evaluation of the relevant credit committee deciding on the financing of the transaction.

Nordea monitors the performance of all active projects in its portfolio to ensure compliance with environmental, social and other conditions. In case of any non-compliance, Nordea will determine an appropriate course of action together with the other lenders.

Nordea reports annually on transactions that have reached financial close. See our EP reports here

For more information about the Equator Principles, read here.

Impact analysis

We ramped up our efforts in 2020 and conducted a combined materiality and impact analysis of our activities, fulfilling the requirements set out in the GRI Standards and in the PRB. The purpose was to identify our most significant sustainability impacts to use as input for our new long-term plan for how to integrate sustainability into our business strategy. The combined analysis was undertaken at two levels in parallel:

  • Strategic level looking at the SDGs, the Paris Agreement as well as international, regional and national regulations and frameworks to identify material sustainability topics.
  • Impact level using the UNEP FI Portfolio Impact Analysis Tool to identify specific targets to drive alignment with and contribution to the sustainability areas identified as significant at the strategic level.

The impact analysis conducted in parallel with the strategic analysis focused on lending, our balance sheet, and took specific country needs and scale of exposure into consideration. It covered three of our four business areas. Asset & Wealth Management was excluded from the analysis as the impact analysis methodology did not yet cover investments/asset management when the analysis was conducted. Since we are a Nordic bank with most of our lending – 99% of our credit portfolio – in four of the Nordic countries, the impact analysis covered Denmark, Finland, Norway and Sweden.

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