Danske Bank Group, headquartered in Copenhagen, has significantly reduced its exposure to fossil fuel companies across its asset management and pension divisions. Through Danske Invest and Danica, the bank has divested from more than 85 percent of fossil fuel-related investments. This strategic shift follows the rollout of a new policy that places greater weight on the strength and credibility of companies' transition plans toward a low-carbon economy.

Transition Criteria Drive Investment Strategy

The decision stems from a methodology introduced by the bank in early 2024. The approach is designed to evaluate fossil fuel companies based on their readiness to align with climate objectives. According to the bank, the new framework was created to better reflect the sustainability preferences of its customers while maintaining a responsible approach to achieving solid financial returns.

Erik Eliasson, who leads responsible investment at Danske Bank, explained that this revised policy brings their investment strategy closer to the expectations of clients. It also reaffirms the bank’s dedication to supporting companies that are serious about their climate commitments.

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Evaluating Climate Readiness: Two Dimensions

Danske Bank's evaluation process combines two key factors: management quality and carbon performance. The bank uses its proprietary Net-Zero Pathway Framework, developed in line with the Transition Pathway Initiative, along with companies’ own published targets. Management quality assesses how well firms are identifying and responding to the risks and opportunities presented by the energy transition. Carbon performance, on the other hand, looks at emissions reduction goals and how closely these align with global climate benchmarks such as the Paris Agreement.

Portfolio Shrinks from 2,000 to 270 Fossil Fuel Companies

The outcome of this assessment process has been a dramatic reshaping of the bank’s investment universe. In 2024, Danske Bank had investments in roughly 2,000 fossil fuel companies. Today, that number has fallen to around 270. This change marks a significant tightening of criteria and a major portfolio shift.

Despite the reduced number of fossil fuel holdings, the bank clarified that its total exposure to the sector has not dropped as sharply. Investments have been reallocated to companies that remain in the portfolio, reflecting stronger climate strategies and potential for transition. These include firms actively rethinking their business models to meet future energy demands sustainably.

Selective Exposure Balances Risk, Reality, and Preference

Danske Bank emphasized that it is not exiting the fossil fuel space entirely. Instead, it is choosing to invest selectively in companies that are demonstrating measurable progress toward decarbonization. According to the bank, this nuanced approach is more in line with the evolving structure of the global energy system and economic realities.

To accommodate a broad range of client preferences, not all investment products follow the new methodology. Some funds completely avoid fossil fuel investments, while others retain some flexibility in their approach.

A Long-Term Perspective on Responsible Growth

Thomas Otbo, Chief Investment Officer at Danske Bank Asset Management, acknowledged the importance of reflecting the global energy mix in investment decisions. However, he also noted that most of their clients now expect a higher level of scrutiny when it comes to fossil fuel holdings.

Otbo stated that being more selective about which fossil fuel companies to support is in the long-term interest of both the planet and investors. The goal is to balance financial performance with a credible and responsible stance on sustainability.

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Conclusion: A New Investment Standard for the Energy Transition

Danske Bank’s divestment move sets a new benchmark for how financial institutions can support the energy transition while honoring the priorities of their clients. By drastically reducing fossil fuel exposure and raising the bar for remaining investments, the bank is signaling a future-focused strategy that values climate alignment as much as capital growth.

As global demand for sustainable finance solutions continues to rise, Danske Bank’s model may offer a roadmap for others navigating the balance between investment returns and environmental accountability.

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