Danske Bank is a key banking actor in Denmark and Nordic countries with US$564 billion in total assets. It announced an updated fossil fuels exclusion policy in March 2021. The new policy shows Danske Bank and its asset investment branches (Danica Pension & Danske Bank AM) are on the right path regarding coal: they are close to catching up with international best practices, but improvements are still needed.

Regarding oil & gas, the partial end of new project financing is positive. Danske must, however, take the next step by stopping all financing and investments towards oil & gas expansion.

The following criteria all apply, with certain exceptions (see below) to all its banking, asset owner and asset management branches (for assets directly managed).

On coal:

On oil & gas:

Exemptions:

Danske mentions several reasons to override these restrictions, both on coal and oil and gas. They can apply only for companies considered as “Paris-aligned” and when Danske either plans to: maintain an active engagement strategy; help accelerate the company’s transition through additional funding; or if companies have a “clear and realistic reduction or phase-out plan”.

These exemptions do not apply for companies drawing over 15% of their revenues from Arctic oil & gas.

By adopting strong criteria regarding coal expansion, Danske bank and its asset owner and asset management branches have made considerable progress: coal expansion is almost fully covered, at the exception of retrofitting and infrastructure projects, as well as coal infrastructure developers.

Regarding coal project financing, such decision was not difficult to make since the bank has not financed any new coal project since 2016 according to the international financial database IJGlobal. Regarding coal developers, this should mean for its investment branches divestment from a number of companies, including but not limited to: Itochu ($19mn), Indonesia Asahan Alum ($15.5mn), Mitsubishi ($11 mn), POSCO ($7.35 mn) or Glencore ($6.2 mn), all considered as developers in the Global Coal Exit List. This also means, though, that one coal infrastructure developer it currently has $15mn invested in (Air Products & Chemical) will not be covered by this exclusion. This is still an important step forward. On the banking side, Danske was not exposed to such coal developers.

Regarding its exclusion threshold, choosing a 5% threshold to be applied immediately is very ambitious and can be considered as an almost immediate phase-out by Danske Bank and its subsidiaries. Yet, this will, according to Refinitiv, leave out some of its major coal customers such as Fortum (1% revenues from coal – $2.25bn in credit between 2016 and 2020).

However, the remaining loopholes are the most concerning part: its exception framework is extremely broad on paper. At the very minimum, the Danish group should disclose the number of exceptions and the names of the companies exempted, a common practice among Nordic financial players such as Swedbank Robur. This is equally true for its exceptions in the oil & gas sector.

On this sector too, Danske bank makes important, albeit uneven, progress. On oil & gas expansion, the end of all new project financing for all upstream activities is positive and shows the commitment of the Danish bank to realign its financing activities towards a sustainable future.

However, Danske must put a complete stop to the financing of oil & gas expansion. This means immediately expanding its commitments to all types of financing, since some deals to oil&gas exploration and production are not made through project finance but other financial facilities. It also means expanding its exclusions to all riskiest hydrocarbon projects alongside the whole production cycle: currently LNG is not covered, neither companies developing such projects, whereas it is one of the riskiest hydrocarbon subsectors, This means Danske can continue to finance deals in this sector, where it has been active, whether financing an LNG carrier in 2019, or a floating storage and regasification unit in 2017. It can also finance companies developing such dangerous projects.

Danske also brought down its exclusion threshold from 30% to 5% for tar sands and decided to cover all unconventional oil & gas (LNG excluded) for its banking activities. This is currently one of the best policies in the sector.

However, it is regrettable that its investment activities (asset manager & asset owner) will only cover the tar sands subsector. This shows a lack of coherence and consistency of the group and is very problematic.

Lastly, the commitment not to offer “refinancing or new financial services to any oil & gas E&P company that does not set a credible transition plan” by 2023 is welcome. However, without defining what such a plan must encompass, such a commitment might become toothless. Danske must then provide more details and include as a minimum standard for such a “credible” transition plan the immediate end of any oil & gas expansion, as required in the latest IEA scenario on 1.5°C.

Danske Bank’s Scores in the Coal Policy Tool

Danske Bank AM’s & Danica Pension Fund’s Scores in the Coal Policy Tool

*Previous grade for Dankse Bank AM was 7 and 6 for Danica Pension Fund

These table present the coal scores of the different branches of Danske (Bank, Asset Manager & Pension Fund) using the five criteria of the Coal Policy Tool

By adopting a much stricter and much more coherent coal exclusion policy, Danske is now in the leading group of Nordic financial institutions regarding the quality of its coal policy. However, it has yet to cover and clarify certain loopholes to have a fully robust coal policy.

On the oil & gas sector, Danske is clearly registering strong progress but is yet to fully apply its commitments regarding non-conventional exclusion criteria, and to really stop all financial support towards oil & gas expansion. It should follow the example set by Crédit Mutuel which adopted strong anti-expansion safeguards.

Find out more:

• Read Danske updated fossil fuels exclusion policy;
• Discover the Coal Policy Tool.