For nearly two hundred years, we have acquired and shared knowledge, developed global networks and adapted to modern everyday life.
Through our role in society, we show how Norway’s largest and one of the world’s best capitalised financial services groups is working relentlessly to combine profitability with responsibility.
Companies that want to maintain their competitiveness must take responsibility for making society a better place. Corporate responsibility in DNB is about how the Group creates value by considering both risks and opportunities in a long-term perspective. As Norway’s largest bank, DNB will help ensure that start-up companies have greater chances of succeeding, and that personal customers are able to make sound financial choices. The bank will invest in and lend money to companies that are future-oriented, and both DNB and society at large will benefit when sustainable solutions gain ground.
DNB has established four pillars for the work on corporate responsibility:
- DNB generates long-term and sustainable financial value creation for its owners. This means that in DNB’s operations, corporate responsibility is emphasised along with other relevant considerations in all decision-making processes.
- DNB contributes positively to society. This means that specific goals and measures related to selected United Nations Sustainable Development Goals shall be defined, and that systematic efforts shall be made to reach these goals.
- DNB is honest and trustworthy. This means that products and services are always tailored to customer needs. DNB wants the best for its customers In a world with new market entrants and major change, DNB shall be a bank that customers trust.
- DNB is transparent about its operations. This means being open about the dilemmas faced when balancing short-term and long-term considerations. The Group shall be attentive to the needs of customers and society, recognising when expectations change and engaging in dialogue with relevant stakeholders. This does not imply acting on all expectations, but listening to those who may have relevant insight into the business decisions made by the Group.
Promote innovation and restructuring
WHY THIS IS MATERIAL
As Norway’s largest bank, DNB contributes to the development of an active and well-functioning business sector. DNB promotes innovation and restructuring and contributes to long-term value creation in Norway by acting as a competent partner which provides good advice, helps companies gain access to equity and debt capital and ensures efficient settlement solutions.
Today, there are approximately 500 000 small and medium-sized enterprises (SMEs) in Norway. They are the bedrock of the Norwegian business community, representing 99 per cent of all companies in the country and accounting for around half of all value creation. SMEs are very important growth engines and a vital driving force for restructuring and innovation in the Norwegian business community. Although most of them remain small, some grow to be strong and create many jobs. In the transition to a low carbon society, DNB also plays an important part by financing the companies that help fulfil the objectives of the Paris Agreement and meet the 2°C target.
POLICY AND APPROACH
The pace of change in society is escalating, and the average life span of companies has been reduced considerably over the past few years. At the same time, new and innovative companies create growth and new jobs. This is why entrepreneurs are playing an increasingly important role in maintaining today’s welfare society. Approximately 60 000 new companies are established in Norway each year, and only about three in ten get past the first five years. DNB has helped entrepreneurs and start-up companies over many years. For DNB, it is important to be there from the start and ensure that as many start-up companies as possible succeed. DNB aims to help more people dare to take the plunge and succeed in creating jobs for themselves and others. The focus has mainly been on making things easier for them and on being a good sparring partner and adviser. The commitment to promoting innovation and restructuring in the Norwegian economy involves the entire Group. DNB implements measures that are related to both services and meeting places, and to cooperation with other key players. The initiatives to support start-up companies are founded on DNB’s governance principles, and are in accordance with the Group’s purpose and values.
The restructuring of Norway also requires that private capital is put to work to promote future growth and value creation. DNB has Norway’s largest network of entrepreneurs and start-up companies. At the same time, the Group has the largest network of investors. DNB wishes to facilitate venues where these parties can meet. It is when ideas and capital meet that future value and jobs are created.
The Board of Directors and DNB’s group management team follow the start-up initiatives and participate in the social debate about what are the correct and important measures to promote innovation and restructuring. Reports are regularly sent to the group management team and the Board of Directors regarding the measures initiated. The group management team actively participates in arenas and events which are relevant for entrepreneurs and for companies that are in a restructuring or growth phase.
EVALUATION OF RESULTS IN 2017
As Norway’s largest bank, DNB has an important role to play in helping the Norwegian business community gain access to capital. Business loans are an important source of growth and profitability for companies. DNB increased its lending to small and medium-sized enterprises in Norway by 10 per cent from 2016 to 2017 (5.3 per cent from 2015 to 2016).
DNB launched the NXT initiative in 2016. DNB NXT is Norway’s largest meeting place for entrepreneurs and investors, and in 2017, events were held in ten different locations throughout Norway, with a total of more than 2 500 participants. This resulted, among other things, in about 2 000 meetings between start-up companies and potential investors. DNB’s NXT initiative is part of a long-term strategy to help ensure that more private capital is invested in exciting growth companies.
The entrepreneurial company Startupmatcher and DNB joined forces to develop NXT Matcher during the course of 2017. This is a digital platform that connects entrepreneurs and investors. More than 3 000 entrepreneurs and investors found their way to NXT Matcher during the autumn of 2017, and the number is rising. The platform enables companies to easily find potential business partners, investors or investment objects, and gives them the opportunity to make direct contact.
Towards the end of 2016, the Group launched DNB NXT Accelerator, a three-month programme for technology companies, to which DNB and StartupLab invited promising startups. The purpose of the programme is to help the selected companies reduce the time to market for their products. The programme provides financing, expertise, networks, advisory services and support. In 2017, there were 109 applicants, and five companies were selected and completed the three-month programme in the spring of 2017.
In April 2017, DNB launched Startskudd.no – a crowdfunding platform where entrepreneurs, clubs and associations with a customer relationship in DNB can present their projects to a Norwegian audience. It is up to the customers’ networks and other interested parties to decide whether they want to help realise the ideas. In 2017, nearly 150 projects were presented on the platform. Crowdfunding has enabled many entrepreneurs to start manufacturing their first products. Examples of successful projects include MovieMask, Bergh Watches and Heat Experience, all of which have managed to raise substantially more capital than they had aimed for.
In 2017, a total of 3 213 potential entrepreneurs received help and advice from DNB’s start-up pilots, both in physical meetings and over the phone. This was an increase of 16 per cent from 2016. In addition, the start-up pilots make webinars, hold courses and are present at entrepreneurial events across Norway. Since their introduction, the DNB start-up pilots have registered more than 11 000 inquiries from entrepreneurs or potential entrepreneurs.
Did you know that around ten nurses and four doctors are employed in DNB Livsforsikring?
THE WAY FORWARD
DNB’s ambition for the corporate market in Norway is: “By cooperating with us, our customers will have a greater chance of success.” DNB will assist everyone who starts their own business and pave the way for more people to do the same. DNB plays an important role as an intermediary between ideas and capital. The Group will highlight promising entrepreneurial companies and help ensure that they get the best growth conditions. Some will be customers in the years to come, others will become business partners, and some may perhaps become future competitors. All of them will make a positive contribution to society, both through their own activity and indirectly through subcontractors. This creates ripple effects which, in total, amount to a significant social contribution. In 2018, DNB will therefore highlight Norwegian small companies through the project “Ringvirkninger” (ripple effects). Read more about this on dnb.no.
Promote financial literacy
WHY THIS IS MATERIAL
With two million personal customers in Norway, DNB has a special responsibility to ensure that as many people as possible have the possibility to make good financial decisions. Research shows that poor financial habits are passed down from one generation to the next, and DNB regards it as its corporate responsibility to help as many people as possible develop good financial habits. Customers who are financially literate are also able to make good financial choices. This is beneficial for society, customers and DNB.
POLICY AND APPROACH
The responsibility for promoting personal financial literacy is embodied in the bank’s governing principles, which state that the bank shall support socially beneficial causes and secure important social values in those areas and industry sectors where the Group has operations. One of the bank’s main initiatives to promote financial literacy is the learning programme A Valuable Lesson, developed in partnership with the Norwegian Red Cross. A Valuable Lesson is a digital learning tool consisting of five modules within personal finances. The programme complements the learning targets for the fifth to seventh grade (10 to 12-year-olds). DNB believes it is important that children learn about personal finances at an early age so that they can make sound financial choices, irrespective of background. The division for Corporate Responsibility and Public Affairs is responsible for A Valuable Lesson.
In a society that is becoming increasingly digitalised, and where manual services are gradually being removed and/or becoming fee-based, it is important for the bank’s customers to have a minimum level of knowledge about digital banking services in order to be able to manage their own financial affairs. At the same time, DNB has realised that some customer groups will never be fully digital. DNB will also offer banking services to non-digital customers, and therefore implemented various measures for this customer group in 2017.
To simplify the learning process for these customers and enable them to use the knowledge at home, DNB has developed a “Guide for digital banking services”, both for the Internet bank on PCs and tablets and for the mobile bank. This is available to all customers in all branch offices across Norway and can be sent by post if requested by calling DNB’s customer centre.
For younger customers, the bank has relaunched a book called “Skikk og bank” (in Norwegian only). This is a book for those who have just left home, containing tips and advice especially related to personal finances. It is intended to provide young people with a good foundation for developing sound financial habits, thereby preventing them from getting into financial problems.
In addition to these specific measures, DNB regularly holds seminars for customers to help them make better financial choices. This may be seminars on pensions, shares, savings or macroeconomic trends. Markets offers training courses via webinars and web TV broadcasts for private individuals, and is also present in different social media. The courses deal with everything from equity trading, analyses, market updates and macro events to company presentations. In addition, Markets offers training to companies and institutions within foreign exchange, fixed-income and commodities, and arranges thematic seminars on markets, products, funding opportunities, risk management and regulations.
EVALUATION OF RESULTS IN 2017
As a follow-up to last year’s course for older customers, DNB has worked on a project called “Bank uten nett” (offline banking). Based on various criteria, the bank has identified around 65 000 customers with whom communication has not been satisfactory because they are not digital. They should nevertheless be able to have a functional and effective customer relationship with DNB.
To identify the challenges faced by these customers and what can make it easier for them to perform everyday financial tasks, the bank has conducted in-depth interviews, user tests and workshops with people in the target group. Based on the insight gained in this way, DNB has prepared a booklet to be sent to these customers at the beginning of 2018. The booklet describes services which are mainly used by non-digital customers: BrevGiro (giro sent by regular mail), Avtalegiro (direct debit), SMS services and SMS alerts, Kontofon (telephone banking service), deposit/withdrawal notebook and account statements by regular mail. A separate phone number has also been established for calling directly to advisers with everyday banking as their area of expertise.
In addition to distributing information about relevant manual self-service solutions and products, the bank will also make a few adjustments in the customer service for this target group. The goal is still to enable as many customers as possible to use self-service solutions, but not necessarily with the help of digital tools.
As the customers in this group are not digital, their opinions about the bank have not been recorded through the regular user surveys. Efforts are therefore being made to develop a system for measuring customer satisfaction in this group by phone.
2017 was also defined as a “Savings Year” in DNB, where particular importance was placed on giving customers access to products and services which make it easier to save. The savings app ‘Spare’ provides a simple way for the customers to deposit money in accounts or mutual funds and have a complete overview of their own savings. Share savings account with an extended fund selection and individual pension savings (IPS) are all included in the new app, which was downloaded more than 250 000 times in 2017 and contributed to strong growth in the sale of savings agreements.
A separate campaign aimed at young adults (aged 18-33) has also been launched, as young people today want guidance and are looking for information on matters such as personal finances when they are leaving home. DNB will be there for this customer group to build trust in the bank as a sound long-term adviser. This is defined as the ‘young segment’.
No new campaigns were launched to recruit more teachers to A Valuable Lesson in 2017. The number of registered teachers is still around 1 300. The tool has been evaluated, and a relaunch is planned in the first half of 2018.
THE WAY FORWARD
In 2018, DNB will continue work on further developing A Valuable Lesson, especially linking it to the prioritised families and young segments. Further measures for the non-digital customers are also under preparation.
In connection with the update of the materiality analysis, new methods will be worked out to measure the bank’s efforts to raise the financial literacy of the population.
Integrate sustainability considerations in operations
Responsible and sustainable investment implies taking environmental, social and economic conditions into account and ensuring sound corporate governance in investment management. The main purpose is to achieve long-term returns with an acceptable level of risk, contribute to sustainable development and avoid contributing to the violation of fundamental rights. Customers on behalf of whom DNB makes investments, expect the Group’s investment activities to be responsible. Responsible investment is important for DNB’s life insurance company, the Group’s equity investments, management of mutual funds and the active management of investors’ portfolios of financial instruments.
POLICY AND APPROACH
DNB has responsible investment guidelines for its investment operations to ensure that the Group does not contribute to the infringement of human and labour rights, corruption, climate change, serious environmental harm or other acts which can be perceived to be irresponsible. The guidelines for responsible investments cover all asset classes and financial investments through DNB Livsforsikring and Group Investments in DNB. They also apply to the business area Wealth Management & Insurance and the companies established under DNB Asset Management Holding AS.
The work on responsible investment in DNB is based on internationally recognised principles. The measures used are mainly positive screening, active ownership through dialogue and voting, negative screening and exclusion. According to DNB’s guidelines for responsible investment, companies will be excluded from the investment universe if they themselves or entities they control produce tobacco or pornography. Nor does DNB invest in companies involved in anti-personnel mines or cluster weapons, as described in the Anti-Personnel Mine Ban Convention and the Convention on Cluster Munitions, or in companies which develop and produce central components for use in weapons of mass destruction. The guidelines include a coal criterion, whereby mining companies and power producers which themselves, or consolidated with entities they control, derive 30 per cent or more of their income from thermal coal, or base 30 per cent or more of their operations on thermal coal, may be excluded from the investment universe. In addition, emphasis shall be placed on forward-looking assessments of the companies, including any plans to reduce the share of their income or operations derived from thermal coal and/or increase the share of their income or operations derived from renewable energy sources.
DNB’s Ethical Investment Committee monitors compliance with the guidelines. The Committee has five meetings each year, where information about companies and relevant topics relating to environmental and social issues and corporate governance are presented and discussed. If a company is involved in controversial weapons or the production of tobacco or pornography, or violates the coal criterion, all securities will be sold, and the company will be excluded from the investment universe. When a company is suspected of violating other criteria in the guidelines, DNB will principally try to influence the company through active ownership and dialogue. Active ownership is based on the UN Global Compact and the OECD Guidelines for Multinational Enterprises and is in line with the United Nations’ Guiding Principles on Business and Human Rights. In cases where companies in which DNB has holdings on behalf of customers are suspected of acting contrary to DNB’s guidelines and internationally recognised standards and conventions, DNB will encourage them to correct their actions. Companies that act contrary to DNB’s guidelines or over time show no willingness to rectify the situation, may be excluded.
DNB’s ambition is to offer its customers equity and fixed-income funds investing in companies which excel in environmental and social performance and corporate governance. Consequently, DNB puts considerable resources into ensuring that the Group’s responsible investments are of high quality. The work is undertaken by a dedicated sustainability team that is working closely both internally with investment management, and externally with the companies. Their assessments are supported by two external consulting firms that monitor companies in the portfolio, prepare sustainability analyses and engage in dialogue with companies in cooperation with and on behalf of DNB and the Group’s customers. The purpose of the dialogue is to nudge the companies in a sustainable direction and contribute to value creation. The contact with the companies is often triggered by special issues relating to environmental and social aspects and ownership administration, but may also reflect a wish to improve the companies’ general sustainability performance. Event-based dialogue is based on the severity of the suspected violation of the guidelines, the size of the Group’s holding in the company and the probability that the dialogue will influence the situation. DNB also takes an active stance on selected topics. These topics are constantly revised, and in 2017, special attention was paid to sustainable ship recycling, shale oil and gas extraction, corruption and requirements for subcontractors in emerging markets. DNB has, on behalf of its customers, been engaged in several dialogues with Norwegian and global companies on these topics and is working continuously to strengthen the companies’ efforts to become more sustainable.
EVALUATION OF RESULTS IN 2017
DNB works continuously with sustainability and climate issues. As a step in reducing environmental and climate risks and carbon footprint in the portfolios, in 2016, climate and coal criteria were included in DNB’s guidelines for responsible investments. In 2016, 44 companies were excluded based on the coal criterion. In 2017, an additional 25 companies were excluded, 24 based on the coal criterion and one based on the environmental criterion. As at 31 December 2017, a total of 154 companies were excluded.
The carbon footprint, measured in terms of carbon intensity, is the measure of a company’s greenhouse gas emissions relative to the company’s turnover, and is one of several factors that say something about the company’s climate risk and impact. Since 2016, DNB has measured the carbon footprint of equity funds as part of efforts to reduce exposure to companies with high climate risk. In 2017, the carbon footprint at company level and portfolio level was integrated in the portfolio and investment management system as part of the process to integrate the work on climate issues in investment management. In April 2017, DNB Asset Management signed the Montréal Carbon Pledge and has thus committed to measuring and publishing the carbon footprint of equity funds.
DNB currently offers three mutual funds with a strategy for sustainability and climate issues that goes beyond the general guidelines. DNB Miljøinvest is a thematic fund that invests in companies that contribute to reducing climate-related emissions, such as renewable energy. In 2017, DNB launched the equity fund DNB Global Lavkarbon, which has a positive screening strategy whereby the sustainability rating of the fund must be higher than the rating of the reference index. In addition, the fund has a negative screening strategy whereby companies with a direct exposure to fossil fuels or a high level of greenhouse gas emissions are excluded. The same applies to DNB Grønt Norden, which also selects companies with an environmental profile
DNB primarily exercises active ownership on behalf of its customers through dialogue with individual companies and by using its voting rights. DNB is in dialogue with board chairmen, management, election committees and other relevant persons in the companies. During 2017, DNB’s responsible investment analysts had 81 meetings with 59 companies to discuss various environmental and social issues, as well as sound corporate governance. In many of the meetings, various topics relating to environmental and social issues and corporate governance were discussed. Through GES Investment Services, DNB conducted 112 dialogues with 97 companies concerning seemingly reprehensible incidents or suspected breaches of international standards or conventions. The dialogues are structured processes with clear targets for the desired outcome. In addition, milestone attainment is measured.
In 2017, DNB voted at 122 general meetings in Norway and six general meetings internationally. At 29 of these meetings, voting was contrary to recommendations made by the board of directors in at least one matter. DNB is in continuous dialogue with the companies to be able to influence them so that cases presented at general meetings are in line with what the Group considers to be good corporate governance.
In the work on responsible investments, the Group’s interpretation of the guidelines for human rights, labour rights and serious harm to the environment has been clarified by preparing in-depth documents. The efforts to show stakeholders how DNB works, on behalf of its customers, will continue in 2018.
THE WAY FORWARD
DNB will continue to refine processes to include environmental and social aspects, as well as topics related to corporate governance, in investment operations. In 2017, DNB intensified its active ownership administration and its efforts to influence companies’ work on sustainability. This is also a key priority for 2018, and in the period up to 2019, the Group will focus on further integrating environmental and social aspects in investment decisions, with emphasis on significant risks and opportunities, as well as active ownership administration. Efforts to further develop mutual funds investing in companies which distinguish themselves with respect to sustainability, will continue.
See a complete overview of excluded companies and read more about responsible and sustainable investments, company dialogue and other stakeholder dialogue in the sustainability library.
Measuring the carbon footprint of equity funds
As part of efforts to reduce exposure to companies with high climate risk, in 2016 DNB started to measure the carbon footprint of all equity funds. Carbon footprint, also called carbon intensity, is the measure of a company’s greenhouse gas emissions relative to the company’s turnover.
DNB uses information from MSCI ESG Research about companies’ emissions. The companies’ carbon footprint is weighted by the respective holding in the portfolios. The same is done for the index. In the calculation, any cash in the portfolios is distributed proportionately between the other companies. For companies without emission data, the average figure for companies in the portfolio with emission data has been used in the calculation. DNB reports CO₂ equivalents, as defined by the Greenhouse Gas Protocol. Scope 1 includes direct emissions from sources that are owned or controlled by the organisation, and scope 2 includes indirect emissions associated with purchased energy. Scope 3, which covers indirect emissions associated with purchased goods and services, is not included, as the companies have not reported such data.
The graph shows 21 equity funds and their respective indices where data on greenhouse gas emissions for more than 90 per cent of the funds’ investments are specified. These 21 funds represent about 80 per cent of the total market value of all of DNB’s equity funds. The graph is a snapshot of the portfolio as at 31 December 2017 and shows that compared with the respective indices, the majority of the funds had a lower or equal carbon footprint.
©2017 MSCI ESG Research LLC. Reproduced by permission. Although DNB Asset Management’s information providers, including without limitation, MSCI ESG Research LLC. and its affiliates (the “ESG Parties”), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein. None of the ESG Parties makes any express or implied warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
Did you know that the staff cafeteria and the employees at DNB’s head office in Bjørvika reduced food waste by 10 tonnes in 2017? This is a reduction of
28 per cent from 2016.
DNB wishes to contribute to sustainable development in society. Responsible business operations that emphasise environmental and social aspects, corporate responsibility and business ethics are essential to DNB. The Group’s resources shall be used to meet customer needs without violating laws and international conventions. This is done because it is morally and ethically correct, but also because it represents sound risk management. The financing of activities in legal or ethical grey areas represents unacceptable risk.
POLICY AND APPROACH
DNB’s credit policy states that risk factors associated with corporate responsibility shall be analysed on a par with other possible risk drivers and be of decisive importance with respect to whether or not applications for credit should be approved.
DNB has a separate group standard for corporate responsibility within credit activities for corporate customers. The standard describes how DNB’s business areas should assess corporate customers’ corporate responsibility (CR) performance and risk associated with environmental, social and governance factors (ESG risk). The standard shall ensure that DNB considers CR/ESG risk for all customers and contributes to promoting responsible and sustainable business operations.
In 2017, DNB established a new document hierarchy with a new structure and new names for the governing documents. The former group guidelines for corporate responsibility were replaced by governing principles for corporate responsibility. Most of the content in the guidelines was transferred to the credit manual. This has helped clarify how corporate responsibility and ESG risk should be assessed, documented and taken into account in credit activities, with adaptations for the various corporate customers.
DNB has adopted the Equator Principles. In Large Corporates and International (LCI), all advice in connection with project financing, project-related corporate loans and bridge loans shall be assessed based on the Equator Principles. The principles serve as a guide for considering whether and ensuring that the financed projects are developed and operated in an environmentally and socially responsible manner. Financial institutions which have adopted the Equator Principles, have undertaken to provide project-related financing only to customers who comply with these principles.
In DNB, each customer team first evaluates whether a project complies with the Equator Principles. DNB’s internal Equator Team reviews the summary, follows up and clarifies any outstanding issues and unidentified risks, and determines the final risk category. A memo and minutes from the Equator Team’s meeting are attached to the credit proposal when it is due to be considered by the relevant credit committee. As part of the annual loan review, compliance with the Equator Principles should be evaluated, confirmed and reported to the relevant credit-approval body for each credit commitment.
Personal Banking and Corporate Banking generally use a portfolio approach to responsible credit.
EVALUATION OF RESULTS IN 2017
DNB acknowledges that some industries may have a greater negative impact on the environment, people and health than others. This could lead to conflicts of interest, as well as financial and legal risk. LCI has therefore developed special sector guidance notes for CR/ESG to ensure that decisions are well-founded and in accordance with DNB’s governing principles for corporate responsibility and commitment to deliver responsible financial services.
In 2016, such sector guidance notes were introduced for the following industries: energy, weapons and defence, seafood, metals and mining, and forestry. In 2017, DNB initiated a process to update the existing sector guidance notes and establish new guidance notes for shipping, packaging and logistics.
LCI has also started to revise the risk assessment tool for CR/ESG risk, which includes extending the discussion points related to human and labour rights. In 2017, a help tool was also introduced for the assessment of industry-specific CR/ESG risk related to financing of companies involved in shale oil and shale gas. The tool will help identify relevant risk aspects of such activities and ensure a good dialogue with the customers about improvement areas.
In addition, DNB is in the process of changing the template for credit proposals in order to emphasise the importance of corporate responsibility and ESG risk. The template now includes a dedicated field for risk aspects related to CR, which must be completed in all credit proposals, with adaptations for the various corporate customers.
Moreover, DNB has started a process to get a better overview of customers who are considered to represent high ESG risk. Manual procedures have been established to keep the overview continuously updated. Parallel to this, efforts are being made to find system solutions for reporting and following up environmental and social risks in the credit process. An e-learning program on how to integrate corporate responsibility and ESG in the credit manual is under preparation, using a new development platform for e-learning, which will also be adapted to the various corporate customers. The program will reflect the changes resulting from the new document structure (see above).
E-learning in the Equator Principles (provided by the Equator Principles Association) has been made available to the relevant DNB units. During 2017, all employees should have completed this training. In addition, the Group’s employees in the US participated in a special review of and training in the principles in May 2017.
In December 2017, DNB acquired a solution that ensures access to relevant ESG analyses of companies, portfolios and industries with which the Group is actively involved. Supplemented by DNB’s own evaluations, the solution will enhance the quality of, and ensure a greater degree of objectivity in, the assessment of customers’ ESG risk as part of the credit process.
In 2017, three projects were processed in accordance with the Equator Principles. The projects can be found in DNB’s sustainability library.
THE WAY FORWARD
DNB will continue to refine its processes to integrate CR/ESG risk in credit assessments and place greater emphasis on describing risks and measures to reduce ESG risk. These processes are intended to determine the overall ESG risk and decision-making level for credits.
Efforts to make it easier to report and monitor environmental and social risks in the credit process will continue. Processes and systems will be adapted so that the estimated consequences and the probability that CR/ESG risk will occur, can be recorded, stored and used for reporting.
E-learning in the chapter on environmental aspects, ethics and corporate responsibility in DNB’s credit manual will be made available to all employees in 2018. Specialised and topic-based training will also be developed and implemented as needed.
Group Credit Risk Management and LCI have appointed resource persons in discussions on issues concerning corporate responsibility. These persons will help ensure that the bank is updated on the subject at all times.
In the course of 2018, DNB will take the initiative to engage in more extensive dialogue with customers about the risks and opportunities associated with ESG and climate issues. In LCI, the objective is to carry out more than 100 customer meetings during 2018, in which ESG and climate are the only topics on the agenda, in order to increase the understanding of risks and opportunities, let the customers know how important this is to DNB and position the Group as a sparring partner and adviser with respect to new business opportunities.
Responsible ship recycling
How can banks contribute to more responsible ship recycling? One answer is by including requirements for responsible dismantling of ships in loan agreements.
In June 2017, DNB joined the Responsible Ship Recycling Standard (RSRS). In September 2017, DNB’s Ocean Industries and Corporate Responsibility divisions hosted an event on RSRS with participation from nine Nordic and international institutions.
With RSRS, the signatories underline the importance of the EU Ship Recycling Regulation and their desire to contribute to a responsible ship recycling environment.
Why is RSRS important? In 2016, more than 600 ships were dismantled on the beaches in South Asia. Ship recycling practices can have negative environmental and social (E&S) consequences in jurisdictions with limited E&S regulations. Negative impacts of ship recycling include environmental damage due to hazardous materials, occupational health and safety risks, as well as community health and safety exposure. Improvements along the whole shipping sector value chain are necessary to make a positive impact.
DNB’s commitment to RSRS entails that the bank has, in partnership with several international banks and financial institutions, taken steps towards a much needed change. As a large financial institution and financial adviser for customers within the maritime industry, DNB has an open dialogue with industry players on RSRS issues. These topics include occupational health and safety, social governance and how the industry meets requirements set by international regulations. If DNB’s partners and customers deliver on the recommendations set out by RSRS, it also decreases financial and non-financial risks for DNB.
RSRS gained momentum in 2017, as more international banks joined the initiative. Changing industry practice will take time, but DNB believes joint efforts across the shipping industry can move the market in the right direction.
Sustainability considerations in the field of insurance are mainly related to environmental aspects. Climate change is resulting in more single, large claims of greater scope. DNB aims to offer products and services which are relevant and transparent for customers. DNB Forsikring offers both property insurance and personal insurance to customers in the personal banking market in Norway. Non-life and personal insurance products cover important needs in people’s lives by protecting their material values in the event of damage and unforeseen circumstances, such as illness or accidents. Insurance operations in DNB are organised in DNB Forsikring AS, a separate limited liability company.
POLICY AND APPROACH
Did you know that you can get DNB account statements in Braille? In 2017, DNB delivered more than 2 500 such statements.
Operations are governed by DNB’s governing principles for corporate responsibility and underlying standards, and the company aims not to contribute to the infringement of human and labour rights, corruption, serious environmental harm or other acts which could be regarded as grossly unethical. DNB’s standard on combating corruption states that DNB has zero tolerance for corruption and is to have a robust defence against corruption based on openness and verifiability. DNB Forsikring is committed to preventing corruption and fraud, and this is a continual process.
The sale of insurance products in Norway primarily takes place through personal contact with customers at physical offices, on the telephone, or in connection with sales processes for the insured objects. DNB has adopted the approval scheme for sellers and advisers in the non-life insurance industry. This is a national scheme to promote and ensure that sellers and advisers have the necessary knowledge and skills and the right attitudes. It is important for DNB Forsikring to ensure the quality of its sales and advisory services so that customers can make the right choices.
DNB Forsikring has a number of agreements with suppliers of insurance services which are offered to customers. It is important for the company that it is as certain as possible that the suppliers with whom it enters into agreements act in an ethical and sustainable manner. When entering into supplier agreements with DNB Forsikring, suppliers must sign DNB’s code of responsible business conduct for suppliers. This document contains requirements for environmental management, ethical business practices, human rights and labour standards on a par with other contracts entered into by the Group. Read more about responsible purchasing in the sustainability library.
The actuary function in DNB Forsikring is head of FUAS – the Specialist Actuary Committee for Non-life Insurance in Finance Norway. Through its role in FUAS, DNB Forsikring has participated in Finance Norway’s environmental work since 2009 by, among other things, participating in a pilot project where the company contributes with detailed data on insurance claims. The aim has been to achieve a better understanding of risk and to identify the need for more preventive work.
EVALUATION OF RESULTS IN 2017
As at 31 December 2017, DNB Asset Management managed a capital portfolio of NOK 2.6 billion on behalf of DNB Forsikring. The company has its own asset management strategy with separate risk limits for insurance, and otherwise complies with DNB’s group guidelines for responsible investments. Read more about the operationalisation of the guidelines in the responsible investment section.
In 2017, DNB Forsikring went through a phase of restructuring and streamlining. During the year, a new core system from the supplier TIA was introduced. The new core system offers much greater opportunities for developing smart and simple digital solutions for customers, and forms the foundation for the insurance company of the future, offering products that are easy to find, easy to understand and easy to buy. A shift towards sales through digital channels is expected in 2018, which will also ensure lower prices for customers. In 2017, DNB launched a scheme called “Bonusbulken” (the bonus bump) for car insurance policyholders, challenging the existing bonus system in the insurance industry. The company covers one bump per year without loss of bonus. This marks the start of a period during which innovative products, product simplifications and improvements will be launched at a much faster pace than in the past, to the benefit of customers.
Again in 2017, the company was audited by DNB’s auditor, DNV GL, in connection with the ISO 14001 certification held by DNB. The audit did not result in any follow-up items. DNB Forsikring will continue to work with environmental issues, which will particularly affect the company’s claims settlement processes.
THE WAY FORWARD
DNB Forsikring will continue to provide ever-better data to be used in environmental work. Related claims data will be used to enable the insurance industry, the public authorities and society to make the right decisions. This work will also clarify the roles and responsibilities of the municipalities and the government.
The future ambition of DNB Forsikring will be to further incorporate corporate responsibility and sustainability in all of the company’s relevant processes. Increased focus on preventing damage by means of information and notification systems is a logical consequence of a future scenario where climate risk is increasing due to factors such as more frequent and stronger storms and heavier precipitation.
View risks and opportunities in a long-term perspective
The rapid changes in global and national development trends underline how important it is for DNB to view risks and opportunities in a long-term perspective. To DNB’s owners it is essential that long-term challenges are reflected in the Group’s corporate governance, something which is also specified in the State Ownership Report. For the Group, a long-term strategy will contribute to stability and profitability over time.
POLICY AND APPROACH
The new strategy clearly states that DNB will generate long-term and sustainable financial value creation for its owners. The Group’s corporate responsibility is about creating value by considering both risks and opportunities in a long-term perspective. This means that long-term aspects must be prioritised over short-term aspects in strategic choices.
DNB’s governance system shall contribute to maintaining a long-term perspective in addition to ensuring balanced monitoring of the company’s performance. This is done by, among other things, establishing financial, operational and strategic KPIs, in addition to health and risk indicators. In this way, targets are set which do not solely rate the financial performance of the Group, but also non-financial values.
To ensure that risk management is integrated in the Group’s governance processes, the risk appetite framework is included as part of DNB’s governance system. The framework represents an operationalisation of the Group’s policy and guidelines for risk management, whose purpose is to contribute to a strong and long-term risk culture.
In order to operationalise the risk targets, appurtenant boundary indicators are set, and in the aforementioned governance system, separate KPIs are established which define acceptable risk. The framework distinguishes between different risk categories, including profitability and earnings, capital adequacy, market risk, credit risk, liquidity risk, operational risk, compliance risk and reputational risk. Over the last few years, greater emphasis has been placed on the three latter risk categories, and this contributes to a balanced approach to the long-term risk scenario.
The indicators are first set at group level before they are distributed or implemented in the rest of the organisation. Monitoring takes place through a dashboard system to help ensure that the risks which have been identified as most significant at group level, are also subject to monitoring and discussion in operative units in the organisation. Follow-up via the dashboard also helps to highlight developments and trends.
Risk appetite is reported monthly to the group management team and is also a significant part of the quarterly risk report, which is presented to the Board of Directors. Other measures to develop the risk culture in the Group include training programmes for employees within risk management and assessment.
The group executive vice president for Group Risk Management is the premise provider for the group policy for risk management in DNB. Security risk is included in the policy for security, which is owned by the group executive vice president for IT. All group executive vice presidents have executing responsibility, and compliance is monitored according to three lines of defence. All managers are responsible for reporting non-compliance with the principles in the policy.
Climate risk and efforts to ensure DNB’s value creation in a long-term climate risk scenario have gained increased attention in the bank. In July 2017, DNB decided to sign a letter of support to the TCFD (Task Force on Climate-related Financial Disclosures). The TCFD aims to strengthen the reporting of climate-related financial information in order to promote the capital markets’ shift to a low carbon economy. Read more about DNB’s efforts related to the TCFD in section 15 under Corporate governance.
DNB’s incentive structure is meant to safeguard the Group’s risks and opportunities. The variable remuneration scheme is performance-based without exposing the Group to unwanted risk, and it also aims to counter excessive risk-taking, as well as promote healthy and effective risk management in DNB. This is secured through a strong link between individual target setting and the Group’s governance model.
DNB does not offer other long-term incentive schemes for its employees. Read more about risk management and the remuneration scheme in section 12 under Corporate governance.
EVALUATION OF RESULTS IN 2017
In 2017, DNB implemented a new group standard for the development of new products and services. The purpose of this standard is to ensure high quality in DNB’s portfolio of products and services, and thereby increase the Group’s competitiveness, improve its reputation and safeguard its corporate responsibility. The standard and procedures for compliance shall support effective product development and approval, and contribute to innovation and change capacity. Thus, the standard helps reduce risk in connection with individual commitments and services, as well as at group level.
The standard was launched under the name “Shelf Control” and has been very well received in the bank. It is the first standard ever to be presented by the group chief executive at a special event. The launch was also streamed, enabling all employees to follow the happening. The ambition is that all products and services which DNB offers its customers go through the same process, the Shelf Control. A status report on the Shelf Control process will be ready in the course of 2018.
The elements in the delivery of a product or service often span business areas and support units, legal entities and external parties. The group standard uses different roles to allocate responsibility and is therefore independent of the organisational structure. All roles have an independent responsibility for making sure that sound assessments and decisions are made in the best interests of customers and DNB.
THE WAY FORWARD
The process of reviewing all existing products and services according to the new group standard has been started and is expected to be completed in 2018.
DNB’s planned TCFD efforts include setting more specific goals for the Group’s work on climate risk.
2018 will also see an increased focus on strengthening the connection between the Group’s overriding risk appetite principles and the implementation of these in the Group’s various business areas and support units.
Ensure openness and transparency
DNB aims to ensure confidence in the bank’s intentions and future prospects through openness about the Group’s opinions and activities, as this contributes towards building trust. The information DNB communicates to its stakeholders, particularly through reporting, must be reliable, complete and relevant. By openness, DNB means being open about its own operations and corporate governance, having open communication and opening up to new players as a result of the introduction of the Payment Services Directive PSD2.
POLICY AND APPROACH
DNB’s Code of Conduct describes how the Group shall communicate openly, honestly and unambiguously. This is important to make the right decisions and create a good working environment. The communication shall be timely and correct without compromising confidentiality, privacy protection or other obligations.
The group guidelines for compliance also apply in this area, in addition to the guidelines for combating corruption. DNB has zero tolerance for corruption and aims to have a robust defence against corruption based on openness and verifiability. DNB’s efforts against corruption are based on six fundamental principles: a risk-based framework, top level commitment, risk assessment, integrity due diligence, communication and training, as well as follow-up. The responsibility for implementing the guidelines lies with the managers. Each business area, support unit and international unit shall ensure that relevant risk analyses are conducted, and that the anti-corruption work is monitored, regularly evaluated and followed up with relevant measures. All employees must complete the mandatory “Know: risk” training course on anti-money laundering and counter-terrorist financing.
DNB supports initiatives in the financial services industry which promote openness and transparency. Through integrated reporting, the bank will provide good and complete information about the company’s ability to achieve long-term value creation, including how macroeconomic, social and environmental factors affect the company. DNB bases this work on the regulatory framework International Integrated Reporting Council, IIRC, and uses an “input-output” model to describe its business model and value creation. The model clarifies which input factors are used and shows dependencies and connections in the business model and the values created.
EVALUATION OF RESULTS IN 2017
In connection with the launch of the Group’s new strategy, a description of what is inherent in DNB’s corporate responsibility has been prepared. Openness and transparency are key aspects. This means being open about the dilemmas faced by DNB when balancing short-term and long-term considerations. The Group shall be attentive to the needs of its customers and society, recognising when expectations change and engaging in dialogue with relevant stakeholders. This does not imply taking into account all expectations, but to listen to those who may have relevant insight into the business decisions that are made. See also the sustainability library for an overview of the stakeholder dialogue for 2017 (link below).
Integrated reporting helps ensure transparency about the overall value creation in DNB, and it is especially important to make information available online. It was therefore very gratifying that DNB won the award for the best digital annual report for companies, the Farmand Award, in 2017.
One area in which transparency is becoming increasingly important, is taxes. In 2017, DNB prepared and delivered its first country-by-country report to the tax authorities. The report is an important tool for achieving greater tax transparency vis-à-vis the tax authorities in the countries where DNB has operations. In Norway, the requirement to deliver an annual country-by-country report is based on OECD recommendations. The tax authorities will exchange the report with other countries in which DNB has operations. The purpose of the country-by-country report is to give the tax authorities greater insight into companies’ global operations, and thus gain a better basis for assessing the risk of incorrect pricing and the allocation of profits.
DNB has chosen to publish the main features of the country-by-country report that is sent to the tax authorities (see the report in the sustainability library, link below). DNB provides financial services to customers from branch offices and companies in several countries, and thus contributes to the tax income in the relevant countries through the payment of taxes, duties and other fiscal charges. In addition, DNB contributes through tax deductions for employees and withholding tax deductions in several countries. Therefore, DNB has also included other tax-related contributions in addition to taxes paid in the overview below.
In addition to publishing the main features of the country-by-country report, DNB has published its tax strategy in accordance with legal requirements in the United Kingdom.
DNB aims to have a culture in which it is encouraged to speak up about conditions that are not acceptable. If raising a concern through official channels does not lead anywhere, employees can submit a notification through an anonymous whistleblowing channel. A new whistleblowing channel operated by a third party is scheduled for release in 2018.
THE WAY FORWARD
The stakeholder dialogue will be further formalised, and more units in the bank will be involved in the process to listen to different voices. This includes setting up more regular meetings with stakeholders and involving them in both quantitative and qualitative surveys in connection with the updating of the materiality matrix. DNB will also continue to adapt and further develop relevant tax information for increased tax transparency.
In the time ahead, transparency will also be critical for the bank’s competitiveness in the face of new and unknown market players. To meet new regulations, such as the EU’s new Payment Services Directive (PSD2), and the increased demand from external players for the direct integration of customers’ banking data, DNB has established DNB Open Bank. Open Bank is organised in DNB’s unit for the development of new business models, New Business, and aims to give new and existing customers easier access to the bank’s data, thus allowing them to develop new and innovative digital solutions based on DNB’s existing data and infrastructure. The world surrounding DNB is rapidly changing, and the Group wishes to contribute to innovation and value creation in the financial services industry by opening up and inviting others in. To succeed with this, the Open Bank team is focusing on delivering a top-quality experience for developers through access to DNB’s APIs and developer platform. Read more about PSD2.
DNB’s tax contribution
DNB contributes to society in a number of ways in the countries where the Group is represented. Tax is one of the areas where DNB makes a significant contribution to society, and the country-by-country report shows taxes paid in the countries in which DNB has operations (see the report in the sustainability library).
The overview below includes other tax-related contributions in addition to taxes paid.
In 2017, the total tax contribution amounted to NOK 17 282 million, of which NOK 13 766 million was paid to the authorities and NOK 3 516 million was tax collected on behalf of the authorities.
HOW MUCH TAX DID THE DNB GROUP PAY IN 2017?
1) Financial activities tax in 2017 is only related to employer’s national insurance contributions. Additional income tax will not be paid until 2018.
Taxes paid constitute a cost for the Group and include:
The Group pays tax on income generated in the individual countries in which it has operations based on national tax rules in the country where the respective units are resident for tax purposes. Paid income tax means actual tax paid during the year regardless of which fiscal year the tax is related to.
Non-deductible value added tax (VAT)
DNB pays VAT on purchases of goods and services. The Group is only allowed partial deductions for input VAT, which means that a large part of the VAT constitutes a cost for the Group. The amount includes all non-deductible input VAT on the purchase of goods and services.
Employer’s national insurance contributions
As an employer, DNB is obliged to pay employer’s national insurance contributions and other social security contributions based on the employees’ salary and other remunerations.
Financial activities tax
The financial activities tax was introduced in 2017 and is an additional tax imposed on companies within the financial services sector. This tax consists of two elements: the tax rate for financial institutions at 2016 level (25 per cent), and an additional tax of 5 per cent for employers, based on the payroll of companies in the financial services industry.
This may be withholding tax on interest and dividends that DNB cannot subtract from other tax.
HOW MUCH TAX DID THE DNB GROUP COLLECT ON BEHALF OF THE AUTHORITIES IN 2017?
In addition to taxes paid by the Group itself, DNB collects the following tax on behalf of the authorities through its operations:
Tax deductions for employees
In many countries, employers are required to withhold taxes and other social security contributions when paying salaries to employees.
VAT paid to the authorities
DNB must report and collect VAT on the purchase and sale of taxable goods and services. In addition, DNB calculates and pays VAT on purchases of goods and services from abroad. Net tax is reported and paid to the local tax authorities in the individual countries.
This could be withholding tax deducted from interest and dividend payments and collected on behalf of the authorities.