Denmark reports climate footprint of its FX reserves

May 18, 2023|Written by Scott Speer

For the first time, Denmark’s central bank, Nationalbank, has disclosed the climate footprint of a portion of its foreign exchange (FX) reserves, noting a significant reduction across three climate metrics.

The disclosure is limited to just 10% of its FX reserves; 8% of which consist of bonds issued by government and regional authorities, and 2% comprises equities and corporate bonds invested through exchange-traded funds. The bank attributes the lack of disclosure for other asset classes to insufficient data and a lack of standardardisation.

The report discloses data from scope 1 and 2 emissions, as well as production-based emissions. Using three metrics to provide an overall picture of a climate footprint, the disclosure details a significant reduction in all three between 2021 and 2022, including the weighted average carbon intensity (WACI) which has been recommended by the Network for Greening the Financial System and the Task Force on Climate-related Financial Disclosure. The bank has explained that the reduction is due to switching to exchange-traded funds that comply with the EU’s Paris-aligned benchmark.

The Danish government has pledged a 70% reduction in CO2 emissions by 2030 compared to 1990 levels, aiming for climate neutrality by 2050. However, a recent study conducted by the Nationalbank shows that investment funds, insurance companies and pension funds have allocated 1.3bn krone to listed companies that contribute to greenhouse gas emissions.

The report highlighted a positive trend, indicating a 20% decline in emissions from scope 1 and 2 between 2018 and 2022. Nevertheless, it also shows an increase in the past year within insurance, pension funds and investment funds. Overall, the financial support provided in 2022 resulted in the financing of approximately 10.9mn tonnes of greenhouse gas emissions.

Jonas Jensen-Dharmaratne, chairman of Danish campaign organisation Godepenge, said: “While we recognise this is a first step for NationalBank increasing its climate transparency, immediate action must be to steer finance away from climate-damaging companies and actions. Monetary and fiscal policies must work in tandem to make it more expensive for banks to finance fossil fuels and cheaper for regenerative, value-adding activities.”

This page was last updated May 16, 2023

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