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Danish investors’ climate footprint has been reduced

Danish institutional investors, i.e. insurance and pension companies and investment funds, have invested more than kr. 1,300 billion in listed companies with varying greenhouse gas emissions. Together, they thus financed emissions of 10.9 million tonnes of greenhouse gases in 2022, which is a reduction of around 20 per cent since 2018. Concurrently, the investors have become less exposed to equities in companies with high greenhouse gas emissions measured in relation to revenue. The figures for the investors’ climate footprint are presented in a new publication of climate-related indicators from Danmarks Nationalbank.


Financing greenhouse gas emissions

The climate footprint of financial corporations consists primarily of financing of non-financial corporations’ activities, which result in varying degrees of greenhouse gas emissions. Investors’ climate footprint is linked to investments in equities and corporate bonds, while banks’ climate footprint is mainly linked to corporate lending.

For example, an investment fund will finance emissions of 20,000 tonnes of CO2e if it owns equities and corporate bonds equivalent to 10 per cent of the value of a company that emits 200,000 tonnes of CO2e annually. Calculated in this way, the Danish investment funds financed emissions totalling 4 million tonnes of CO2e in 2022 through their investments in equities and bonds of around kr. 500 billion in listed companies. The main part of greenhouse gas emissions occurs in foreign companies, as investment funds make more investments in foreign equities than in Danish equities.

Danish insurance and pension companies, including the investment funds they own, financed emissions of 6.9 million tonnes of CO2e through their investments of around kr. 800 billion in listed companies. This is higher than for the investment funds, as insurance and pension companies manage larger amounts of funds invested in listed equities and corporate bonds. 


The calculation of financed emissions measures the greenhouse gases that are directly and indirectly controlled by the companies. This may, for example, be burning of fossil fuels in connection with production or emissions from energy purchases from utility companies (scope 1 and scope 2 emissions).

Other greenhouse gas emissions linked to the companies’ value chains are not included in the financed emissions. This may, for example, be emissions related to the processing of materials by suppliers or emissions from the use of products (scope 3 emissions).

In percentage terms, insurance and pension companies have reduced their financed emissions by 20 per cent from 2018 to 2022, while the reduction is 23 per cent for investment funds, see chart 1.

The decrease in financed emissions is primarily due to both insurance and pension companies and investment funds having reduced their ownership shares in companies with high greenhouse gas emissions. Secondly, greenhouse gas emissions have stagnated or decreased in a number of companies since 2018. 


Financed emissions (scopes 1 and 2) via listed equities and corporate bonds in non-financial corporations. Annual data calculated using a quarterly average. *2022 shows preliminary figures, see sources and methods (link). 


Danmarks Nationalbank.

Exposure to emission-intensive activities

Insurance and pension companies and investment funds have become less exposed to equities in emission-intensive companies since 2018. This helps reduce the risk that changes in, for example, policy and regulation in connection with the green transition may reduce the value of the investments, the socalled transition risks. Emission-intensive companies are characterised by having high emissions of greenhouse gases relative to their revenue, and they are thus comparatively more exposed to transition risks.

Transition risks associated with a portfolio’s exposure can be described using the analytical indicator WACI. The indicator measures the weighted average carbon intensity of greenhouse gases for every kr. million in revenue in the companies that form part of an equity portfolio. A high WACI value therefore means that a large proportion of the equity portfolio is invested in emission-intensive companies. In 2022, an average of around 20 tonnes of CO2e was emitted for every kr. million in revenue generated in t e listed companies that formed part of the equity portfolios, see chart 2. This is a decrease of approx. 40 per cent relative to 2018, when the carbon emission intensity averaged around 35 tonnes of CO2e per kr. million in revenue.


Weighted average carbon intensity (WACI) is calculated for listed equities and corporate bonds in non-financial corporations. Data have been compiled at the end of the year (4th quarter). *2022 shows preliminary figures, see sources and methods (link). 


Danmarks Nationalbank.

The indicator thus shows that the exposure of both insurance and pension companies and investment funds to emission-intensive companies has decreased significantly. One of the reasons for the decrease in exposure is that large investors have reduced their portfolio share of emission-intensive investments. The overall decrease in emissions is also due to decreasing emissions in the individual companies measured relative to revenue, see chart 3.


Weighted average carbon intensity (WACI) has been indexed to 100 in 2018. Sum totals do not necessarily tally due to rounding. The reduction has been decomposed on contributions from (i) changes in portfolio share of emission-intensive companies and (ii) changes in average carbon intensity (greenhouse gas emissions in relation to revenue). 


Danmarks Nationalbank.

How we proceeded

The financial sector helps finance society’s activities through loans and investments, thereby contributing to financing greenhouse gas emissions. Reporting on the climate footprint of financial investments is an area undergoing continuous development, concurrently with sustainability reporting having gained ground.

Danmarks Nationalbank monitors the development in the financial sector widely and will, in future, publish data on a number of climate-related indicators. These indicators show both aspects of financing of greenhouse gas emissions and the financial sector’s exposure to emission-intensive companies.

There is not yet a global standard for how exposure to financial climate risks should be disclosed and reported. The indicators chosen in Danmarks Nationalbank’s statement are based on recommendations from the organisation Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) and the organisation Partnership for Carbon Accounting Financials (PCAF), which are working to c eate a common set of global reporting standards. The statistics include financed CO2e emissions and weighted average carbon intensity (WACI).

However, the climate-related indicators cannot fully show the climate footprint of the financial sector. This is connected with a number of factors, including data quality. For example, there are still no data on greenhouse gas emissions in unlisted equities and corporate bonds. Nor is the climate footprint of banks’ corporate lending to non-financial corporations included in the published data. The climate-related indicators will gradually be expanded as data quality and data availability improve.

The climate related indicators must be interpreted with caution. The indicators indicated the emission of greenhouse gasses, CO2e, from the real economic activities of listed companies. The indicators do not necessarily follow the development of the actual greenhouse gas emissions in the economy, but may depend on the restructuring of the share portfolio, price developments etc.

Calculation and interpretation of the indicators are explained in more detail in Sources and Methods (link).