Banks in the Nordic region face scrutiny over their financing of fossil fuel projects
In the realm of global finance, the nine largest Nordic banks find themselves under intense scrutiny for their fossil fuel financing and adherence to climate commitments, particularly in relation to their membership in the Net-Zero Banking Alliance (NZBA) and the Glasgow Financial Alliance for Net Zero (GFANZ).
Despite these memberships and announced climate targets, a significant amount of fossil fuel financing continues, even by banks that claim net-zero targets by 2050. This financing extends beyond outright fossil extraction to include expansion projects in fossil fuel production, a move that many climate campaigns argue contradicts Paris-aligned commitments.
Campaigns like Banks and Climate stress the need for immediate and decisive action. Banks must adopt and implement policies that exclude new finance for fossil fuel expansion projects and phase out all fossil fuel finance in line with a 1.5°C warming scenario.
The transition to fully aligned fossil-free strategies is far from complete. Banks are encouraged to align their energy finance with at least a 6:1 ratio of renewable versus fossil investment by 2030. There is a call for transparent, disaggregated reporting on energy finance, excluding so-called "false solutions" such as certain types of hydropower, hydrogen, biomass, and carbon capture.
The industry is not without its tensions. Some major banks, though not specifically named as Nordic banks in recent reports, have exited the NZBA or expressed concerns about its enforceability and effectiveness. This raises questions about collective accountability versus individual strategies.
Nordic banks, located in countries like Norway where courts have ruled on the need to consider full lifecycle emissions from fossil fuel projects, face growing regulatory and legal challenges that could drive stricter fossil fuel lending policies in alignment with international climate obligations.
However, there are no definitive public rankings or reports on the performance of the nine largest Nordic banks in relation to their NZBA/GFANZ commitments and fossil fuel financing. The general narrative is that all major banks, including Nordic ones, have significant work remaining to truly align their finance with the Paris goals.
Notable examples of funded projects include the expansion of a coal mine in the Czech Republic, which could lead to the emission of at least 60 million additional tonnes of CO2e, and oil exploration activities that threaten sensitive Arctic ecosystems.
To be part of the NZBA, banks must be accredited by the UN's Race to Zero campaign, use science-based guidelines to achieve net-zero emissions, cover all emission scopes, set interim 2030 targets, and commit to transparent reporting and accounting standards.
DNB, Norway's largest bank, and Swedish SEB are members of the Net-Zero Banking Alliance (NZBA). Among the projects funded are the controversial East African Crude Oil Pipeline (EACOP), which could force 100,000 people to leave their homes or farmland. Nordea alone has lent more than $400m to the coal industry.
The revised membership criteria for the GFANZ could make it harder for investors to hold banks accountable for fossil fuel financing. Departures from the NZBA are primarily driven by US regulatory pressures and heightened reporting expectations for members.
In this complex landscape, it remains crucial for Nordic banks to accelerate their transition to sustainable and just energy transitions consistent with a 1.5°C scenario.
