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Nordea provides financing to customers’ businesses, mortgages and other activities. We want to use that opportunity to increase the positive impact by financing sustainable activities and, at the same time, decrease the negative impact by financing the transition away from high carbon emitting activities.
Our focus is to support and strengthen our customers through periods of change and enable them to reach new goals. We have a long term perspective and we firmly believe that companies with sustainable business models carry lower financial and reputational risk. It is about increasing our customers’ resilience and to future-proof our business and the businesses of our customers.
200bn
in sustainable financing.
90%
of our exposure to large corporate customers in climate-vulnerable sectors is covered by transition plans.
Nordea’s largest emissions, 99.9% for 2022, come from our indirect emissions of financed customers and the companies we invest in, classified as our scope 3 financed emissions. Nordea has one of the most ambitious overarching objectives among banks: to reduce carbon emissions across our lending and investment portfolios by 2030 by 40-50% compared with 2019.
So far, between 2019-2022, Nordea has decreased its financed emissions from its lending portfolio by 19%. A key driver for this has been from large corporates, where the emissions are down by 36%. There are many contributing factors, including a decrease in the financing of oil, gas and offshore by more than 70%.
Active engagement is Nordea’s strategic approach, as opposed to exclusion or denying companies our services. Massive investments are needed throughout society if we are to reach the Paris Agreement and we want to support our customers in this transition.. We are here to help our customers to address key sustainability issues and provide guidance.
De-selection or exclusion of specific activities will however also need to occur. Nordea has set a clear phase out for offshore, coal and unconventional oil & gas in our fossil fuel sector guideline. Where customers are not able or willing to transition, we will mutually consider our engagement and exposure.
Having joined the Net Zero Banking Alliance in October 2021, Nordea committed to setting sector targets. The first round of these targets was communicated in December 2022, supplementing previously communicated targets. Nordea will continue to set sector targets in carbon-intensive sectors and this work is scheduled based on climate vulnerability and data availability.
Nordea’s Code of Conduct describes the high-level ethical principles that guide our business and includes aspects such the environment, labour rights, 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 sector guidelines and our sustainability policy. These documents guide Nordea’s ESG assessments in our risk management and due diligence processes.
ESG assessments are performed for both lending and investment portfolios of Nordea’s balance sheet to identify, evaluate and monitor material ESG-related risks. These processes are being enhanced through a multi-year implementation programme and we provide detailed descriptions of these processes in the Capital and Risk Management report.
For corporate borrowers, in summary, ESG assessments are performed according to the size and type of the transaction and the customer’s internal segmentation. ESG-related risks identified qualitatively as material at customer level provide input to the credit risk assessment to reach conclusions on the customer group’s risk level included in the credit memorandum. Approvals are made according to the established credit decision-making process. For customers associated with a high level of ESG-related risks, decisions are escalated to higher-level credit committees where relevant.
Climate-related transition risks have since 2021 been assessed with an enhanced focus through the Climate Risk Assessment Tool (CRAT), for the largest exposures in climate-vulnerable industries for Business Banking (BB) and Large Corporates and Institutions (LC&I) business areas. The key components of the assessment include counterparties’ greenhouse gas (GHG) emissions intensity developments, corresponding quality of their transition planning and the resulting impact of climate-related transition risks on customer repayment capacity. This analysis is aligned with the Group targets on financed GHG emissions reductions and transition plan coverage.
For mortgage borrowers, the main ESG-related risks relate to collateral energy efficiency and physical hazard exposures. In 2022 Nordea has focused on assessing the available energy efficiency information for our mortgage portfolio and long-term exposure to physical hazards in a changing climate.
