Nordea´s risk management framework focuses on managing risks in line with our risk appetite and has defined clear risk, liquidity and capital management frameworks. In the current dynamic environment with increasing regulatory requirements, changing customer behaviour, new competitors and new technologies, Nordea continuously develops its risk management framework, ensuring that material risks are captured.
Risks related to sustainability are managed and governed based on Nordea’s guiding principles on sustainability as set out in the Group Board Directive on Sustainability, which implies that it shall be integrated into our investment and lending activities as well as in our advice to customers. Risks related to sustainability factors cannot be treated in isolation to other risks as they can have a financial impact.
Initiatives to integrate ESG risks into the credit risk framework have been implemented, such as reflecting sustainability considerations in the Group CEO Instructions on Credit, embedding these in credit policies and guidelines to enhance the bank’s capability to identify and monitor ESG risks, in order to highlight the potential credit risk impact of ESG risks at both customer level and portfolio level.
In 2019, climate risk was added to Nordea´s Risk Taxonomy as a sub-risk category to ESG risk. Climate risk is mainly managed through policies/strategies, frameworks, processes and through focus area deep-dives and scenario analysis as well as through engagement and shifting assets to greener products. We are currently focusing our climate-related work on carbon-intensive industries as well as on energy-consuming sectors.
Several Industry Credit Policies were developed in 2019 with dedicated sections on ESG risks and mitigation, as part of the credit risk framework. The Board also approved an ESG Risk Appetite Statement during the year. In 2020, we will continue to enhance our risk assessment principles and monitoring activities for sustainability risk in line with developments in the regulatory landscape.