Sustainable finance

Woman in workshop with two others looking at Sticky notes on a board

Lending is the core business of a bank. For the bank to be well-functioning and sustainable, it is critical that the lending is made responsible. A key objective for Swedbank is to provide credit and lending facilities, as well as advisory services or access to capital markets, to enable the transition to a low-carbon economy and to help clients manage transition risk. To enable this, we continuously integrate environmental, social and governance (ESG) criteria into our lending process. It is important that Swedbank’s customers are financially sustainable and prepared for changing conditions with the right amortisation and debt levels.

Integrating ESG criteria in our business processes

For Swedbank, lending to individual customers and businesses is a long-term responsibility. For corporate lending, Swedbank’s credit policy requires the borrower to demonstrate appropriate management of relevant environmental, social and governance risks. It is also important that Swedbank’s customers are financially sustainable.

Swedbank performs sustainability risk assessment in connection with business loans based on environmental, social and governance aspects. The analysis includes sustainability-related issues such as human rights, business ethics, the environment and climate change, taxes and corruption. The aim with the assessment is to see how risks related to these areas could impact the customer’s and the bank’s profitability and reputation. By engaging in dialogue with the customer, we can also identify new opportunities, such as investment needs tied to the specific sector’s sustainable development. The overall objective is to integrate sustainability-related risks and opportunities into business decisions and support customers in addressing relevant environmental, social and governance matters.

For principles and guidance, Swedbank has Group-level policies, sector guidelines and position statements. When sustainability risks and dilemmas arise, a committee provides further recommendations.

A key factor in our general lending processes is to verify the identity of our customers and understand the customer's business, activities and purpose of establishing a relationship with the bank, known as a Know Your Customer (KYC) analysis. Creating a good understanding of how sustainable the customers business model is and how cash flow and earnings are generated is central.

We engage with our clients on ESG-related risks and opportunities

It is important for Swedbank to engage with our customers on ESG-related risks and opportunities. Client Executives are supported access to a dedicated ESG team for corporate customer dialogues as well as internal guidelines and knowledge uplift. These resources provide better insight into the sustainability area with both opportunities and risks facing various industries, as well as suggestions and advice on which ESG-factors should be addressed.

Sustainable financing products

To support our customers, Swedbank has developed a diversified offer of sustainable financing products and services.

Sustainable products and services

Green mortgage loans: Swedbank wants to promote energy efficient housing and offers a discounted mortgage rate to customers who live in housing that meets specified requirements.
Green car loans: Swedbank wants to encourage private customers to choose a low emission vehicle that meets certain environmental criteria. Customers are offered interest discounts if the car fulfils such criteria.
Solar panel loans:Discounted interest rate on loans for solar panels, which produce renewable energy and reduce electricity costs.
Energy loans: Energy loans are available to customers in Sweden and used to finance residential energy savings.

We promote and support our clients in their sustainability transition by financing green and social projects. By issuing green, social and sustainability bonds, Swedbank has the opportunity to promote and support the long-term development of sustainable solutions through financing sustainable innovations and services.

Green, Social and Sustainability bonds
Swedbank’s ESG Capital Markets team offers advice to customers that seek to finance themselves in the capital market through Green, Social and Sustainability bonds. These bonds have been available in the capital market for more than ten years to finance or refinance specific green or social projects/investments.

Swedbank also offers advice on sustainability-linked bonds, which were introduced in the capital market in 2019. Their structure differs from traditional green, social and sustainability bonds, as this type of debt instrument is used for general business purposes and includes a penalty if specific ESG targets are not met.
Sustainability-related advisory
Swedbank’s ESG Capital Markets team offers ESG-related advice to both issuers and investors in the capital market. Besides specific advisory related to ESG bond issuance, this also includes ESG weekly newsletters, ESG-related events. Another area is ESG analysis within macro, equity and credit research, which is delivered by Swedbank or joint by Swedbank and SB1 Markets. Swedbank Macro Research produces analysis on sustainability related themes within the macroeconomic field. For example, a recurring product is our Sustainability indicators, which measure the progress of Nordic and Baltic countries towards achieving the UN Sustainable Development Goals. Sustainability topics is a standing element in our flagship macroeconomic report, Swedbank Economic Outlook, and in several of our other research products.
Green equity
The Green Equity Designation is based on a concept developed by Swedbank in collaboration with Shades of Green, formerly part of CICERO, now a part of S&P Global, a leader in second opinions on Frameworks for sustainable debt instruments. The main criteria for a company to qualify for the Green Equity Designation is that over 50% of its revenue and investments must derive from activities considered green by the external party. As an alternative, a Green Equity Transition Designation is attainable for companies with the ambition to transition to become green and that has a significant share of investments allocated to green activities.
Sustainability Linked Loans
Sustainability Linked Loans differ from green loans in that they can be used for general business purposes rather than a specific purpose. They are tied to the borrower’s sustainability targets and strategy, and are monitored through social, ethical or environmental indicators. The borrower’s sustainability performance is tied to the loan’s pricing in relation to predetermined performance targets. Improved performance reduces the financing costs. If the targets are not reached, the interest rate can instead be raised, resulting in a higher financing cost.
Green car leasing and Green Car Fleet
Financing low emission cars through leasing, to discount conditions.