We have made good progress in reducing greenhouse gas emissions from the Bank’s own activities in recent years and we will continue in this direction. After Arion Bank became a signatory to the City of Reykjavík and Festa’s Declaration on Climate Change in 2015 our initial focus was mainly turned inwards, that is to say increasing awareness and understanding of environmental and climate change issues among our employees and reducing emissions from our activities.

We are proud of our green journey, and our focus on environmental and climate issues is being increasingly embodied in the Bank’s range of services and products. In 2021 the Bank published a comprehensive green financing framework and issued its first green bonds. Directing financial resources towards green development and the circular economy is hugely important in the fight against climate change and we fully intend to continue on this trajectory. See the sections on green finance and responsible banking for further information.

Green finance
Responsible banking

At the end of 2021 sustainability risk was defined as one of the Bank’s six principal risk factors and it is therefore included in the Bank’s risk management framework. The board of directors approved a sustainability risk policy in 2021, which states that the Bank seeks to ensure that its operations and services do not have a negative impact on people or the environment. It also states that the Bank supports Iceland’s climate action plan whose goal is to meet the obligations of the Paris Climate Agreement and to achieve the ambitious goal of carbon neutrality by 2040. The CEO has appointed a sustainability committee which has the mandate to make decisions in this policy area. At the end of the year the committee approved the Bank’s updated environment and climate policy and new and updated targets up until 2030. 

Arion Bank’s environment and climate policy

We aim to be a role model on environmental and climate issues and to minimize greenhouse gas emissions and the negative environmental impact of our activities. Man-made climate change is one of the greatest challenges of our time and it is critical that global warming is restricted to below 1.5 degrees Celsius. We are committed to helping Iceland meet its obligations under the Paris Climate Agreement and other domestic and international environment and climate treaties and to reach the ambitious goal of a carbon neutral Iceland by 2040.

Banks perform a vital role in funding progress and our focus is on funding projects on sustainability and green infrastructure.

We also require our suppliers to consider the environmental and climate impact of their activities. When comparing similar offers from suppliers, environmental and climate considerations will be decisive in our decision. The Bank’s goal is to reduce emissions of carbon dioxide and other greenhouse gases from our activities by at least 55% by 2030 from the base year 2015 and to carbon offset all remaining emissions.

We are setting ambitious targets and will publish the results of our progress in areas where we have the greatest impact, such as buying, our own activities and the services we provide to our customers. We endeavour to enhance our employees' knowledge and understanding of environmental issues and to support our customers' journey towards a green future in accordance with the UN Sustainable Development Goals.

Targets up to 2030

In 2022 we will set a target on green loans as a percentage of total loans up to 2030.

Status: Completed – will be reviewed annually.

The percentage of green loans which come under the Green Financing Framework is currently 11% of the Bank’s total loan portfolio, which was ISK 936 billion at year-end. The Bank aims to increase this figure to at least 20% by 2030. By setting this target the Bank aims to increase its green lending so that the annual growth rate of the green loan book is double the growth rate of the Bank’s total loan book. This target on the ratio of green loans will be reviewed annually, taking into consideration the opportunities over the next few years for green financing and the implementation of EU taxonomy in Iceland. The Bank hopes the growth rate might be even quicker.

In 2022 we will adopt a policy concerning those sectors in which our loans have the greatest impact in terms of environmental and climate considerations.

Status: Not completed

Originally, our aim was to adopt a policy on those sectors in which our loans have the greatest impact in terms of environmental and climate considerations in 2020. It was decided to postpone this work and to focus on completing the Bank’s Green Financing Framework. The Green Financing Framework was published in mid-2021 and we have defined our targets with respect to expanding our green loans. In 2022 we will continue in this direction and adopt policies on those sectors which have the most impact on the environment and climate change.

We will ask our main suppliers about the environment and climate impact of their activities.

Status: Completed – continuously in progress

The Bank’s environment and climate policy requires our suppliers to take into account the environmental and climate impact of their activities. Furthermore, when comparing similar offers from suppliers, environmental and climate considerations will be decisive in our decision.

The new buying rules approved in the autumn of 2020 took this into account, and a new supplier assessment was introduced in which suppliers are appraised on their performance in terms of environmental and climate issues, as well as equality and labour laws. In 2020 all the Bank’s main suppliers with whom the Bank has made outsourcing agreements underwent the suppliers’ assessment. The suppliers’ assessment is conducted on suppliers above a certain size and by the end of 2021, 23% of them had been assessed. During the year 70% of new suppliers who come under this definition and have an agreement with the Bank have undergone the assessment.

In 2022 we are going to start measuring the carbon footprint of our loan portfolio in accordance with PCAF. Once we have obtained a clear picture of the loan portfolio’s carbon footprint, we will set ourselves a target on how to reduce the footprint up to 2030 in accordance with the objectives of the Paris Climate Agreement.

Status: Not completed

In November 2021 Arion Bank became a signatory to the Partnership for Carbon Accounting Financials (PCAF). This is a global partnership of financial institutions that work together to develop and implement a harmonized approach to assess and disclose the greenhouse gas (GHG) emissions associated with their loans and investments. Arion Bank will apply this methodology in 2022 to estimate the carbon footprint of its loan portfolio.

From 2023 the Bank will no longer buy vehicles which do not run on 100% renewable energy.

Status: Not yet due – positive progress.

76.5% of vehicles operated by the Bank are plug-in hybrids or electric vehicles. The transition to renewable energy is making good progress with respect to the Bank’s fleet of vehicles. From 1 January 2023 the Bank will no longer buy any vehicles for use in its business which do not run on 100% renewables.

We intend to increase the ratio of sorted waste produced by the Bank to 90% by 2023.

Status: Not yet due – positive progress.

This target is progressing according to schedule with regard to operations waste but it is proving difficult to meet the target for construction waste. 77.2% of operations waste is now sorted but only 12.3% of construction waste.

The Bank’s goal is to reduce emissions of carbon dioxide and other greenhouse gases from our activities by at least 55% by 2030 compared with 2015 and to carbon offset all these emissions.

Status: Not yet due – positive progress.

Originally, the Bank’s target was to reduce emissions from activities by 40% from 2015 to 2030, i.e. from business premises and vehicles. By the end of 2020 the Bank had already reduced emissions by 34.7% and it was considered time to update the targets and make them more ambitious. The Bank is now aiming to reduce emissions by at least 55% by 2030 and to carbon offset all remaining emissions. At the end of 2021 emissions were 37.6% lower than in 2015. The Bank has entered into an agreement with the Iceland Carbon Fund on carbon fixation to offset emissions from the Bank’s activities and other emissions such as flights, taxi journeys, waste and employee journeys to and from work. The Iceland Carbon Fund has planted approximately 5,000 trees to offset the Bank’s emissions in 2021. It does not involve verified carbon units.

Highlights of environmental accounts for 2021

We have reported on our achievements regarding the status and actions in environmental and climate issues since 2016. The base year for the Bank’s environmental accounts is 2015, and our aim is to have reduced emissions from own activities by 55% by 2030. The highlights of the environmental accounts for 2021 can be seen here. Details of the environmental accounts can be found in the table of non-financial information.

Non-financial information

Total emissions of greenhouse gases from own operations, i.e. from vehicles and business premises, have decreased by 37.6% since 2015 (Scope 1 and 2). Of this total, total emissions from vehicles decreased by 64.8% and from business premises by 12.8%. As before, the main opportunity for further reducing emissions from the Bank’s activities is to completely stop buying fuel for vehicles.

We have set ambitious targets on reducing greenhouse gas emissions by 2030, and every year we will take measures to carbon offset our activities. We are teaming up with Iceland Carbon Fund to plant around 5,000 trees to offset emissions from our own activities for 2021, i.e. business premises and vehicles, and also from flights, taxi journeys, waste and employee journeys to and from work. In addition Arion Bank has provided financial support to the Icelandic Forestry Association for many years, and in 2021 a new 3-year agreement with the organization was signed.

Enhanced data collection has enabled us obtain better information on acquired services (Scope 3). In 2015-2018 international flights, flights by contractors, flights with international airlines, taxi journeys and data destruction have been added to the Bank’s environmental accounts, which partly explains why recorded total emissions of greenhouse gases from acquired services have increased during the period.

In 2020 employee journeys to and from work were added to Scope 3. However, other emissions in Scope 3 have decreased in recent years. Subtracting employee journeys, the decrease in Scope 3 between 2015 and 2021 was 76.6%.

Flights decreased significantly between 2019 and 2021, mainly as a result of the Covid-19 pandemic. In 2021 information on flights was added to the Bank’s accounting system, and we have therefore gained a far more accurate picture of flights than before.

Information on sorting waste for 2021 is presented by type of waste; firstly the ratio of sorted construction waste, and secondly the ratio of operations waste. The Bank’s target is to get the ratio of sorted waste to 90% by 2023, and this target is progressing according to schedule with regard to operations waste but it is proving difficult to meet the target for construction waste.

Travelling to and from work

In 2021 Arion Bank adopted a policy on working from home. The policy offers greater flexibility in terms of where people work and a more varied working environment in step with changing times. Working from home more regularly saves time and reduces the carbon footprint of commuting to and from work. The strategic application of remote working is therefore beneficial for employees, the company and society as a whole.

In mid-year Arion Bank reached an agreement with Hopp, allowing employees to travel around on eco-friendly electric scooters. Our employees used the scooters to commute to and from work, go to meetings and perform other errands during working hours. Between June and the end of the year, employees took 2,052 trips on electric scooters. We welcome the fact that our people are so open to travelling by eco-friendly means.

At the beginning of 2022 a survey was conducted among employees about their habits when travelling to and from work. Klappir Green Solutions conducted the survey and processed the results. The main results can be seen below, but it should be noted when comparing 2020 and 2021 that the 2020 survey was conducted by another organization. The difference between years may therefore to some extent be due to different methodologies. The results show that the average emissions from transportation per employee in 2021 were 276 kgCO2e which is 2.8% less than the previous year.

The survey revealed that 85% of employees predominantly use a private car to travel to and from work, 11% cycle and 4% use public transport. The majority of those regularly using a private car to and from work drive vehicles powered by fossil fuels, or 67%, but an increasing number (20%) use hybrids/plug-in hybrids, and 13% use cars solely powered by electricity. Total emissions from employee journeys to and from work are 187.9tCO2e in 2021 and come under Scope 3 in the Bank’s environmental accounts.