Environment and climate questions and answers within sustainability
ENVIRONMENT AND CLIMATE
We address environmental aspects in financing and investments as well as in managing our own environmental impact. Our responsibility concerns the impact that we or our business partners have on living and non-living natural systems, including ecosystems, land, air and water. We incorporate environmental and climate considerations into strategic planning, business development, risk management, in credit assessments and customer selection processes. Our impact is both direct through our own emissions and indirect through our customers’ emissions.
In order to manage our own environmental impact, we have set targets to reduce carbon emissions to zero by 2045. This targets includes milestones to reduce emissions with 66 per cent by 2025 and with 75 per cent by 2030, both compared to baseline year 2008. From 2021 onwards, our goal is to reach a net effect of zero through climate compensation.
To manage our indirect impact, we have developed a tool that is used for assessing corporate customers’ current and future climate impacts, the Customer Sustainability Classification tool. We use this model is used as a tool to engage with customers in constructive dialogues about their decarbonisation strategies. Hereby we can support companies in transition with advisory services and financing for potential investment needs.
The tool also enables us to measure and report on the aggregate climate impact of our credit portfolio and to set strategic goals for shifting and aligning our activities with the climate objectives of the Paris Agreement. We describe our approach to climate change, and how we manage our direct and indirect climate impact in the Climate report (prepared based on the recommendations from the Task Force on Climate-related Financial Disclosures, TCFD), included in the Annual and Sustainability Report 2022, p. 54–65.
In April 2021 SEB joined the UN-initiated Net-Zero Banking Alliance through which we commit to align our attributable emissions from our lending and investment portfolios with pathways to net-zero by 2050 or sooner.
SEB has defined three new climate-related ambitions and goals, including laying out a path for the reduction of our fossil fuel credit exposure and at the same time setting growth ambitions for our sustainable products, advisory services and investments.
• Carbon Exposure Index – The Brown: Measuring the fossil fuel credit exposure within the bank’s energy portfolio
• Sustainability Activity Index – The Green: Measuring volumes for sustainable financing, sustainable finance advisory, venture capital investments within greentech, and Article 9 financial investment products’ share of assets under management
• Transition Ratio – The Future: Assessing our customers’ climate impact and alignment with the Paris Agreement, by classifying our credit portfolio using our internal Customer Sustainability Classification model.
These goals are part of SEB's sustainability strategy
As a bank, we have a key role in financing the transition that has already started and which must accelerate in the future. We offer our customers advice and financial solutions to increase access to renewable energy and other technologies that support the transition and decrease the dependency on fossil fuels. We help our customers identify sustainable business opportunities and manage potential risks, and based on a common view of a desired future we agree on a path forward. In those cases where we don’t share a joint understanding we will however over time disengage in an orderly way. An important corner stone in this work is the Customer Sustainability Classification tool.
We recognise the need for society to reduce its dependency on fossil fuel related products given their significant negative climate impact. In February 2021 SEB’s Board of Directors adopted a strengthened policy of fossil fuels. The policy includes a roadmap for how SEB will phase out its exposure to coal and to unconventional oil. It also strengthens SEB’s guidelines regarding environmentally sensitive areas such as the Arctic. We will continue to gradually reduce our credit exposure to fossil fuels within the oil- and gas sector by applying a cap to exploration, production and oilfield services activities. This cap is lowered annually.
Read the full Policy on Fossil Fuel.
SEB has a restricted approach to coal which is stated in the strengthened sector policy on fossil fuel that was published in February 2021. For existing operations we avoid providing financial services to, or invest in, companies engaging in the practice of mountain top removal. SEB will exit current business relationship where more than 5 per cent of the revenues by 2025 is derived from thermal coal mining. For Germany there is a time-limited exception, related to the German national legislation. We shall avoid entering into new business relationships with companies operating thermal coal mines or providing dedicated financing to thermal coal mines. For several years we have excluded financing of new coal-fired power plants.
For new projects and capacity expansion we also avoid providing financial services to, or invest in projects that are dedicated to thermal coal extraction, greenfield or brownfield thermal coal mining expansions as well a infrastructure projects that are dedicated to thermal coal.
SEB’s fund company has a strict approach to fossil fuels. All funds exclude companies that extract or process fossil fuels, including extraction of unconventional fossil fuels, such as oil sands and deep-sea drilling in particularly sensitive areas. Similar restrictions apply for power generation and distribution of fossil fuels. Exceptions can be made for companies that have clear targets and show ongoing active transition plans in line with the Paris Agreement.
We perform engagement dialogues by ourselves and in collaboration with other investors such as Institutional Investors Group on Climate Change (IIGCC) and PRI Clearinghouse. We also work with Hermes Equity Ownership Services (EOS), an international leader in engaging companies in dialogue. Hermes EOS maintains ongoing, direct dialogue with the management and the board of the companies in which we invest.
SEB Investment Management is committed to align investments with the Paris Agreement The fund company aims to reach net-zero greenhouse gas emissions by 2040 on an aggregated level for our investment funds. We continuously monitor the progress and have established following interim targets against a 2019 baseline:
- By 2025 reduce emissions from the fund offering by 50 per cent
- By 2030 reduce emissions from the fund offering by 75 per cent
SEB Investment Management Sustainability and active ownership report 2022
GREEN PRODUCTS & SERVICES
SEB’s product offering reflects one of our main ambitions – to support our customers in the transition to a low-carbon economy and to contribute to a more prosperous future for people and businesses. Among the examples are:
A green bond is a fixed-income instrument designed to fund specific projects that have positive environmental and/or climate benefits. SEB is a pioneer and have been a global thought leader in green bonds since 2008 the World Bank issued the world’s first green bond, arranged by SEB. In 2020, SEB had a leading position in the Nordic market with a share of 22 per cent of global transactions by Nordic banks, and had underwritten an aggregate volume of USD 7.2bn.
A green loan is like any other loan, but the money must be used to support climate and environmentally friendly purposes. For a loan to be eligible for funding by SEB's Green Bond, it needs to adhere to SEB's Green Bond Framework. The Green Bond Framework ensures that SEB’s green bond, by financing green loans, is used for low-carbon and climate change resilient projects and investments. In addition, the green loans should promote environmental and ecosystem improvements and thereby also support the SDGs.
SEB’s updated Green Bond Framework 2022
What is included in SEB’s green loan portfolio?
SEB’s green loan portfolio includes “eligible assets”, i.e. loans and leases to corporate clients in line with SEB’s green bond framework that promotes the transition to a low carbon and/or climate resilient development as well as environmental end ecosystem improvements. In 2021, the green loan portfolio amounted to SEK 25.5 billion. About half of the assets consists of renewable energy projects and the remainder is financing of green buildings, clean transportation and energy efficiency projects.
SEB’s Green Bond Impact Report
The loan cost is linked to the client’s ability to perform on ESG issues such as climate impact mitigation. SEB was a pioneer in linking a sustainability linked loan to Science Based Targets, which links the corporates climate impact reduction to the Paris Agreement. This makes it scientific, measurable and monitorable.
A sustainability-linked bond is linked to the issuer’s sustainability strategy and performance based on predefined and externally verifiable key performance indicators. If the target for the KPIs are not reached, it will lead to a cost for the issuer and a premium for the investors, which can i.a. be regulated either through an adjusted coupon or, as in this case, an adjusted redemption price, which are determined in a reconciliation prior to the bond’s maturity.
Green constructions loans
SEB offers the possibility to apply for green construction loans when financing residential and commercial properties of any size. SEB uses green funding to finance the properties that are classified as green.
Green car leasing
SEB offers green car leasing, which is yet another way for us to contribute to the shift to a low-carbon society. The solution is offered to corporate customers and organisations that choose electric or biogas cars.
SEB was the first large bank in Sweden to offer green mortgages and loans to housing associations. This is based on SEB’s belief that the houses that qualify as green will have substantial energy savings making them less exposed to energy price fluctuations but also more attractive and thus easier to sell.
Green investment products
SEB has various savings and investment products that aim to mitigate climate change. As an example all SEB labelled funds exclude companies that extract or process fossil fuels, including extraction of unconventional fossil fuels, such as oil sands and deep-sea drilling in particularly sensitive areas. Similar restrictions apply for power generation and distribution of fossil fuels. Exceptions can be made for companies that have clear targets and show ongoing active transition plans in line with the Paris Agreement. Read about our exclusion criteria. Among other investment products that contribute to reducing greenhouse gas emissions are the SEB Global Climate Opportunity Fund and the Lyxor SEB Impact Fund.
SEB has chosen not to certify according to any international Environmental Management Standard, e.g. ISO 14001. However, we have major elements of an environmental management system implemented in the organisation. We have a clear organisational structure in place, governing our sustainability work and structure as well as clarifying responsibility for environment aspects. We have an environmental policy and set annual environmental targets that is followed up and reviewed by a third party audit.
SEB’s sustainability experts have extensive knowledge in areas such as climate and financing solutions, sustainable investments and regulatory development in the European Union.