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We ensure a robust and resilient bank

Danske Bank must take appropriate action to measure, monitor and mitigate risks related to sustainability challenges. This is how we can continue to help customers in the future, for the benefit of society at large.  

The risks can be either physical risks (such as extreme weather or damage to ecosystems) or transition risks (such as risks resulting from legislation and regulation meant to address sustainability challenges).

Integration of sustainability considerations into our existing risk management processes is therefore an ongoing area of focus.

Examples of what we do

Customer sustainability and transition risk management

We assess and monitor customers that are considered to be lagging in the transition process in recognition of the expected credit loss to anticipate losses during the transition phase.

For other sustainability risks, relevant restrictions are integrated into our credit process to manage loans granted in sectors that are particularly exposed to sustainability risks.

Portfolio climate stress testing

We perform portfolio climate stress tests to assess physical and transition risks of climate changes. For example, stress tests in relation to physical risks – such as flooding – cover collateral-related exposures and are based on expected loss calculations.

Stress tests in relation to climate transition risks are based on expected loss calculations with respect to an introduction of carbon taxes on all relevant portfolios.

Sustainability screening of investments

We have developed a proprietary model to screen areas and companies exposed to most material sustainability risks and to assess the financial materiality.

We also apply investment restrictions in order to reduce exposure to investments that are involved in activities with a conduct harmful to society, are involved in activities with a negative climate impact or are involved in non-ethical and/or controversial activities.

How we work to be a robust & resilient bank

Steer portfolios in line with transition requirements

- Enhance ESG risk assessments and monitor high-impact customers.

Optimise data flows with prioritised and emerging sustainability topics.

Expand our understanding of sustainability risks

- Further embed management of sustainability-related risks as part of our Enterprise Risk Management framework, including refinement of financial materiality assessments.

- Further develop frameworks for measuring and managing biodiversity and human rights risks.

Manage operational risks related to sustainability

- Enhance our framework for monitoring and prioritising sustainability risks.

- Further define roles and responsibilities for risk management related to new guidance, disclosures and standards.