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Sustainability analysis in lending

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. Based on our vision, we believe that the foundation for a sound and sustainable economy begins with loan amortisation and manageable debt levels. In recent years Swedbank has introduced more extensive amortisation requirements on its mortgages in Sweden.Today we are seeing a change in attitude among customers. The desire to pay off mortgages has increased. Amortisation is now seen more as savings and less as an expense. This is a view the bank shares. Therefore, the customers have an option to amortise up to additional 20 per cent of their loans each year  without prepayment fees. 

Guidelines for sustainable corporate lending

It has become increasingly important for corporations to operate in a sustainable way. Environmental certification or codes of conduct that regulates social responsibility are often requirements in commercial contracts. Also, customers have great power in their selection of sustainable products and services.

The corporate loan application process includes an assessment of sustainability risks. Using an analysis model, we look closely at a company’s impact on human rights and the environment as well as how it handles corruption. We also look at what the company is doing to guarantee respect for human rights in its supply chain, among employees and in the local community. And we find out whether there is structured environmental work going on and analyse how it delegates responsibility, its routines and how it follows up issues. The aim is to see how risks related to these areas could impact the customer’s profitability and reputation, as well as our own. By dialoguing with the customer, we can also identify new opportunities, such as investment needs tied to the sector’s sustainable development.

We have developed extensive internal guidelines for eleven sectors we consider high risk from a sustainability standpoint. The guidelines describe the biggest risks in each sector and suggest questions to bring up in conversation with the customer.

Environmental responsibility in the sustainability analysis aims to determine if there is a structured environmental work – responsibility distribution, procedures and monitoring. It may include an environmental management system. But the client can also have clear roles and routines to compensate for the lack of a management system. Environmental issues have been integrated in the bank’s Swedish lending process since the early 2000s. A more extensive sustainability analysis was launched in 2010. Since January 2012 it has been used in all of Swedbank’s home markets and for all business loans exceeding SEK 5m in Sweden and EUR 80 000 in the Baltic countries.

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