Responsible lending and risk management
One of a bank’s primary contributions to a sustainable society is responsible credit granting, meaning not lending more than the customers have the capacity to repay. SEB’s principle as regards risk is that we take on risk only to create customer value and long term shareholder value.
Our risk culture is based on long experience, strong customer relations and sound banking principles. By including environmental and social factors in our business decisions and discussions with customers, we are long-term better equipped to mitigate risks and seize opportunities. Long-term relations and good knowledge and understanding of the customer and repayment capacity remain the core aspects of SEB’s credit culture.
Position statements and sector policies
SEB has taken a position on three specific sustainability issues – climate change, child labour and access to fresh water – and established policies for six industry sectors – arms and defence, forestry, fossil fuels, mining and metals, renewable energy and shipping.
The purpose of these statements and policies is to establish a common framework for a pro-active and future-oriented dialogue on key issues with our clients, as well as for internal guidance. The sector policies and position statements are included in the regular business review as well as in the annual credit review for large and medium-sized corporates since 2011. Read more about the policies here.
Shifting away from coal
During 2015, SEB revised and thereby strengthened the Climate Change Position Statement. As a consequence we have decided to gradually shift away from coal and will not enter into new business relations with companies with major business in coal mining, nor provide finance for new coal power plants. The latter will only be considered for new coal power plants using special technologies, which substantially reduce greenhouse gas emissions. We can support legacy clients in making beneficial improvements in their transformation away from coal.
Review of energy related credit portfolio
In line with SEB’s updated position statement on climate change, SEB’s energy related credit portfolio is gradually shifting to include more renewables, which now account for almost a third. Fossil fuels related accounted for 44 per cent, with coal less than 1 per cent. Renewable energy covers wind, bio-energy, hydro, waste disposal and solar. The portfolio, which is monitored on a regular basis from both a business and risk perspective, represents about 7 per cent of the total credit portfolio, or about SEK 144 (130) billion.
The Equator Principles (EP), adopted by SEB in 2007, are a voluntary set of guidelines used by financial institutions to assess the social and environmental impact of large projects and to help their customers to manage them. SEB has during the year taken part in the EP annual meeting and in workshops intended to streamline the implementation of the EP as well as further develop the understanding of the principles among international financial institutions, development agencies and private banks.
In 2016, SEB had five project finance transaction under the Equator Principles, one category A (projects with potential significant adverse environmental and social risks) four category B (projects with potential limited adverse environmental and social risks). As regards project related corporate loans, SEB was involved in one category B transaction.
The green bond concept was developed in 2007/2008 by SEB and the World Bank as a response to increased investor demand for engagement in climate-related opportunities. Since then, the market has grown and is now an established part of the global capital market. Companies and organisations seek funding for specific environmental investments, and investors integrate sustainability into their daily portfolio allocation.
In 2016, green bonds were issued to a value of USD 95 billion (43.2), according to data from Bloomberg. Since its inception, SEB has been involved in the issuance of 10.8 per cent of all green bonds globally.
Since inception of the market until the end of 2016, SEB has underwritten Green Bonds to a value of USD 13.7 bn and is the second biggest underwriter globally with a market share of 8.4 per cent. The other Nordic banks have market shares in the range of 0.3–0.8 per cent.
Read more about Green Bonds.
In 2016, SEB established a green bond framework that clarifies various processes for defining, selecting, verifying, monitoring and reporting on a Green Asset and Liability Management (ALM).
Green loans are made for the purpose of financing and/or refinancing projects within the European Union and the Nordic region that promote the transition to a low carbon and/or climate resilient development, as well as environmental and ecosystem improvements.
They include projects that target a) the mitigation of climate change, such as through investments in energy efficiency, renewable energy, green buildings, clean transportation, waste management and sustainable forestry, b) Adaptation to climate change, such as water and wastewater management or c) Environmental and ecosystem improvements, such as emissions reduction, waste management and sustainable forestry. As of the end of 2016, SEB had SEK 11.8bn in the dedicated green loan portfolio, in accordance with our green bond framework.