Copenhagen-based Nordic bank Danske Bank announced the launch of a new approach to its sustainable finance activities, including a broader focus to include supporting companies in high-emitting sectors in their climate transitions, as well as financing companies in transition-enabling value chains.

According to Danske Bank, the initiative reflects “the evolving landscape of sustainable finance,” with the bank having followed a traditional approach until now, primarily focused on allocating funds to specific projects or activities through use-of-proceeds financing or sustainability-linked loan facilities.

Danske Bank Head of Large Corporates & Institutions, Joachim Alpen, said that the new approach is better aligned with its clients’ needs, with many large companies looking to transition to net zero or to scale their low-carbon solutions to address long-term risks and opportunities, but facing risks of losing competitiveness in the short term.

Alpen said:

“As a bank firmly dedicated to serving large organisations in the Nordics, it is crucial that we utilise the power of finance to facilitate climate transition. When our customers commit themselves to credible, long-term transitions, we commit to support them in managing the short-term challenges.”

Under the new approach, Danske Bank said that it will move from solely sustainability-labelled transactions, such as green bonds and loans, to also financing the transition for companies in sectors such as such as power and heat, steel, cement, and transportation, based on comprehensive company-level assessments of entire transition plans.

Transition plan assessments will be conducted using a proprietary transition risk assessment methodology, which scores companies as either transitioned, transitioning, start of transition or lagging transition, based on factors including the net zero alignment of the company, and assessed execution risk.

The bank said that as part of the new approach, it will also look to finance companies in transition-enabling value chains, including areas such as renewable energy technologies, battery technologies, energy transmission and storage, and low-carbon transport.

Danske Bank added that it is maintaining its targets for financed emissions reduction, and that the new approach does not change its position on fossil fuels.

Samu Slotte, Head of Sustainable Finance at Danske Bank, said:

“In the short term, our new and broader approach to transition finance may increase carbon emissions associated with our financing activities. In the longer term, we consider our new approach a significant step forward in our ability as a financial institution to support the climate transition of our customers and society.”