Sound ESG risk management is essential for financial strength
Managing ESG-related risk is key to maintaining our financial strength.
In June 2020, our Risk Committee approved the revision of ESG risk definitions in Nordea’s Risk Taxonomy to consider ESG factors as drivers of existing risk categories such as credit risk, liquidity risk, market risk and operational risk, and to further incorporate them into existing risk management frameworks taking a proportionate and risk-based approach.
Recent efforts have focused on integrating climate-related risks in the Credit Risk Framework while integration with other financial risk frameworks is planned to start in 2021. To support this work, we are participating in external and regulatory initiatives aimed at developing comparable methods for assessing transitional and physical climate impacts and are actively advocating on policy consultations through various industry groups.
Managing ESG risk in relation to our customers
In relation to our customers, Nordea’s Code of Conduct is the central steering document for our financing operations together with our principles on ESG in financing, investing and advice in our sustainability policy.
The ESG evaluation of borrowers is currently integrated into the credit process through the credit risk framework. For corporate borrowers, there are different types of ESG evaluations performed depending on the transaction and the customer’s internal segmentation. In 2021, the credit risk framework will be updated to address regulatory requirements and supervisory expectations on the integration of climate and environmental factors into customer onboarding, evaluation and monitoring processes. For household customers seeking mortgage funding, energy efficiency labels and carbon emissions are one of many factors considered in credit decisions.