Exposing Scandinavian Bank Finance for Fossil Fuels About this report This report covers the role of Scandinavian banks in financing the fossil fuel industry. It is based on research conducted by Profundo, the Netherlands based research and advice consultancy, into the investment and credit flows of ten Scandinavian banks into fossil fuel companies over the period 2016-2020, as well as assessments conducted by BankTrack of the fossil fuel related policies of these ten banks. This report is a joint publication of BankTrack, Profundo, Fair Finance Guide Norway (Etisk Bankguide), Fair Finance Guide Sweden (Sveriges Konsumenter), Oxfam IBIS (Denmark) and ActionAid Denmark. Authors: Ward Warmerdam (Profundo), Daisy Termorshuizen and Maaike Beenes (BankTrack) Contributors: Henrieke Butijn, Hannah Greep and Johan Frijns (BankTrack), Barbara Kuepper (Profundo), Jonas Ådnøy Holmqvist, Embla Husby Jørgensen (Fair Finance Guide Norway), Åsa Mendel-Hartvig, Jakob König (Fair Finance Guide Sweden), Jeppe Bo Rasmussen (Oxfam IBIS), Eigil Johannisson (ActionAid Denmark). With thanks to: We would like to thank all banks that provided feedback on the data presented to them for verification, as well as for providing details on their loan portfolios. Use and copyright: This report was published on February 1st, 2021. This report is in the public domain and may be freely quoted or otherwise used, provided that the source is mentioned. Cover image: modfos through 123rf.com, modified by BankTrack. Disclaimer Profundo and BankTrack observe the greatest possible care in collecting information and drafting publications but cannot guarantee that this report is complete. Profundo and BankTrack assume no responsibility for errors in the sources used, nor for changes after the date of publication. The report is provided for informational purposes and is not to be read as providing endorsements, representations or warranties of any kind whatsoever. Profundo and BankTrack will not accept any liability for damage arising from the use of this publication. 1 Contents Summary of findings ................................................................... 3 1.1 Finance ................................................................................... 3 1.2 Investments ........................................................................... 4 1.3 Fossil fuel finance policies ..................................................... 4 Introduction ........................................................................ 7 Research methodology ......................................................... 9 3.1 Selection of financial institutions ......................................... 9 3.2 Financial research strategy ................................................... 9 3.3 Selection of sectors ............................................................. 10 3.4 Types of finance ................................................................... 10 3.5 Estimating loans & underwriting services per bank ........... 12 3.6 Period covered in research .................................................. 13 3.7 Policy assessment methodology ........................................ 13 3.8 Verification of data .............................................................. 16 Research findings ............................................................... 18 4.1 Credit .................................................................................... 18 4.2 Investments ......................................................................... 20 4.3 Policy assessments .............................................................. 23 Findings per bank ............................................................... 25 5.1 Danske Bank ........................................................................ 25 5.2 DNB ....................................................................................... 30 5.3 Jyske Bank Group ................................................................ 35 5.4 Nordea .................................................................................. 39 5.5 Nykredit Group .................................................................... 45 5.6 Skandinaviska Enskilda Banken (SEB) ............................... 48 5.7 SpareBank 1 SR-Bank .......................................................... 55 5.8 Svenska Handelsbanken ..................................................... 59 5.9 Swedbank ............................................................................ 65 5.10 Sydbank ............................................................................... 69 Conclusion ......................................................................... 73 2 Summary of findings This report provides a comprehensive picture of the credit and investment relationships between ten Scandinavian financial institutions (“Scandinavian banks”) and companies engaged in fossil fuels – oil & gas, and coal, from January 2016 to June 2020, the period since the signing of the Paris Climate Agreement. The report covers corporate loans, issuance underwriting services and project finance for January 2016 to June 2020. Shareholding data was analysed based on the filings for the three most recent financial quarters at the time of the research (Q4-2019, Q1-2020 and Q2-2020). This historical analysis was intended to evaluate the impact of Covid-19 and of the recent oil & gas price war on the portfolios of the selected banks.1 1.1 Finance Since the signing of the Paris Agreement in December 2015, Scandinavian banks have provided US$ 67.3 billion in loans and underwriting to companies engaged in the fossil fuel sector. Of this sum, 18% (US$ 12.2 billion) was provided to companies engaged in coal, and 82% (US$ 55.1 billion) to companies engaged in the oil & gas sector. Figure 1 Ranking of Scandinavian fossil fuel creditors (January 2016 – June 2020) Source: Refinitiv (2020, June), Bond issuances; Refinitiv (2020, June), Share issuances; Refinitiv (2020, June), Loans; IJGlobal (2020, June), Transaction search. 1 Deloitte, "Understanding the sector impact of COVID-19", 1 April 2020, available at https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/COVID-19/COVID-19- Understand-sector-impact-oil-gas.pdf, last viewed 21 January 2021. 3 The largest fossil fuel creditor was DNB, which provided approximately US$ 20 billion in loans and underwriting to companies engaged in the fossil fuel sector (see Figure 1). It was followed by Skandinaviska Enskilda Banken (SEB) (US$ 17 billion) and Nordea (US$ 15 billion). 1.2 Investments As of the most recent filings on June 30th, 2020, Scandinavian banks held fossil fuel shares worth US$ 7.1 billion. 35% (US$ 2.5 billion) was attributable to coal, and 65% (4.6 billion) was attributable to oil & gas. The total value of their fossil fuel investments declined by 34% since Q4-2019, when the value of these investments was US$ 10.6 billion. Nordea had the highest value of fossil fuel attributable investments at the most recent filing date in Q2-2020 (see Figure 2). In total it held shares worth US$ 2.5 billion, of which US$ 1.1 billion was in coal and US$ 1.4 billion in oil & gas. It was followed by DNB (US$ 1.3 billion) and Danske Bank (US$ 1.2 billion). Figure 2 Investments per bank and fossil fuel category at most recent filing in Q2-2020 Source: Refinitiv (2020, August), Shareholdings: 31-12-2019, 31-03-2020, 30-09-2020. 1.3 Fossil fuel finance policies In addition to analysing the fossil fuel portfolios of the ten banks, this report also provides an assessment of the fossil fuel related policies of each bank. Specifically, we assessed whether the policies lead banks to stop financing the expansion of the fossil fuel industry, phase out existing financing and investments in the fossil fuel industry, and/or prevent such financing to occur in the future. Our analysis shows that, although all banks explicitly acknowledge their responsibility to address the climate crisis, the extent to which banks have policies in place to not finance the fossil fuel industry differs greatly. No bank fully excludes such financing and significant gaps remain in the scope of each of the banks’ policy frameworks. 4 The average total score for the ten banks analysed is only 17.15 out of a maximum score of 200, with nine out of ten banks scoring higher on coal than on oil & gas. The bank with the highest score by a wide margin is SEB (75.5 points). 2 SEB is followed by SpareBank 1 SR-Bank (25 points), Svenska Handelsbanken (16.5 points) and Danske Bank (16 points). Jyske Bank, Nykredit and Sydbank all scored zero points, but it must be noted that Nykredit and Sydbank have no credit exposure to the fossil fuel industry, and Jyske Bank has limited exposure, meaning they may see no need to formulate such policies. The table below summarizes our findings for each of the ten banks. It shows the points awarded for the commercial banking and investment policies of each bank on coal (out of 80 points) and oil & gas (out of 120 points). To provide further context, the table also shows the credit exposure to the fossil fuel sector for each bank. Amounts are in US$ billion. For more details on the policy assessments see the specific sections in this report for each bank. Overview of commercial and investment banking policy assessments scores Bank Coal Oil & gas Total Max 80 points Max 120 points Max 200 points Amounts: US$ bn Amounts: US$ bn Amounts: US$ bn SEB Policy score 37 38.5 75.5 Credit exposure 5 12 17 SpareBank 1 SR-Bank Policy score