Danske Bank excludes financing for oil and gas upstream expansion
The success
Danske Bank announced a new policy to exclude general finance, project finance and investment services for upstream oil and gas expansion. The Danish bank is now one of the few banks to have committed to stop financing oil and gas upstream companies with expansion plans that are incompatible with a 1.5ºC scenario. Although new oil and gas midstream projects are not addressed, Danske Bank's new position statement marks a major policy improvement regarding oil and gas upstream expansion.
BankTrack's role
BankTrack has engaged with Danske Bank for many years regarding its fossil fuel policy. We also highlighted Danske Bank as one of the largest Nordic financiers for Arctic oil and gas in the Banking on Thin Ice report, launched in November 2022. And we contributed to raising awareness about fossil fuel financing through the annual co-publication of the Banking on Climate Chaos Report, which includes Danske Bank.
Danske Bank's new Position Statement on Fossil Fuels, published in January 2023 and updated in March, is a significant improvement compared to the previous version from March 2021. The Danish bank follows the recommendations of the International Energy Agency (IEA) and will not finance oil and gas companies with expansion plans for their Exploration and Production (E&P) activities.
Danske Bank will not “provide long-term financing or refinancing to E&P companies engaging in activities related to oil or gas expansion”. In this regard, “oil and gas expansion” is defined as “any activity intended to expand supply of oil and gas beyond what was approved for development by 31 of December 2021” and covers conventional, unconventional (including tar sands and shale) and frontier (including arctic and deep-sea) oil and gas expansion.
The Position Statement applies to general finance, project finance and investment services, and expressly states that the bank will not “directly finance through e.g. project finance, expansion of oil and gas exploration and production”.
Last but not least, Danske Bank also makes refinancing or new long-term financing of any oil and gas E&P conditional on the adoption of a credible transition plan in line with the Paris Agreement. Aside from decarbonisation targets, Danske Bank requires that such a transition plan includes “a commitment to not expand supply of oil and gas beyond what was approved for development by 31st of December 2021”. It is critical that Danske Bank also requires such a transition plan for new short-term financing as well.
The new Position Statement makes Danske Bank one of the few banks excluding financial services for oil and gas E&P companies with expansion plans, in line with the IEA’s Net Zero by 2050 Scenario and in a way that addresses all its financial services.
However, the bank does not set any commitments related to midstream activities, such as pipeline construction. Such new midstream infrastructures projects could unlock the development of new oil and gas production projects, and we look forward to Danske Bank taking further steps to exclude finance for these projects and their developers soon.