Climate issues

We put a great deal of effort into knowing the environmental impact of our operation. Our work on analysing our carbon footprint and impact on society is an on-going venture.

We carry out an in-depth analysis of both the direct and indirect environmental impact of our value chain based on the internationally approved GHG Protocol methodology. The GHG Protocol is the methodology most companies use to calculate their carbon footprint. We also measure emissions from our credit and asset portfolios using the methodology of the Partnership for Carbon Accounting Financials (PCAF) and publish the results.

GHG Protocol methodology

The GHG Protocol methodology defines scope of emission as follows:

Scope 1
Direct emissions from our operation, i.e. emissions from owned or controlled sources.
Scope 2
Indirect emissions from the generation of purchased electricity and heating.
Scope 3
Indirect emissions that occur in our value chain. Indirect emissions from lending activities fall under scope 3.

Total GHG emissions from our operation decreased by 48% between years, not counting emissions from credit products and asset portfolios. The reason for the reduction is construction of our new headquarters in central Reykjavík, where a 90% reduction in emission occasioned by the near completion of concrete work. We also took into use a new methodology to calculate Scope 2 emissions; the effect of this change on the greater picture is minimal.

Considering the Bank’s traditional operation, our emissions are mainly direct emissions from fuel burned by the Bank’s cars and indirect emissions from employee air travel, travel to and from work and production of computer equipment (purchase of new equipment).

Despite remaining one of our main emission sources, emissions from fuel burned by the Bank’s cars has decreased by 30% from the previous year and by just under 60% as compared to 2019. Emissions from employee travel to and from work increase slightly between years and emissions from employee air travel and purchase of equipment increase most of all. The effect and restrictions put in place during the pandemic are receding and we see the effect in increased emissions from employee air travel. The increase quadrupled from the previous year yet is still only half of 2019 emission levels. Emissions from the production of computer equipment doubled between years, in part because of the purchase and installation of new equipment for our new headquarters. All in all, these last few categories account for around 75% of the Bank’s indirect emissions, not having regard for emissions from the credit and asset portfolios.

Emissions from the construction of our new headquarters are no longer the single largest indirect emission factor following emissions from the credit and asset portfolios, which they have been since construction began in 2019. The image below shows the division between categories.

Emissions from the Bank’s traditional operation amount to a mere 0.2% of total emissions from our activities, with indirect emissions from the credit portfolio having the largest impact. Indirect emissions are always most significant in our operation. While we can only affect indirect emissions indirectly, we are working to minimise them through such action as maintaining a dialogue with our suppliers and customers. Only a small portion of the carbon footprint of the Bank’s traditional operation is direct, or from electricity or heat generation.

The below image shows our emissions by scope.

We have assessed emissions from the Bank’s credit portfolio for the years 2018-2021 and for its asset portfolio for 2020 and 2021 using the PCAF methodology. As the methodology uses information from the financial statements of companies, we are unable to analyse the Bank’s credit portfolio until annual financial statements have been published. It is important for banks to know the indirect impact of their GHG emissions to take informed decisions on climate issues. Our main conclusions are presented in the table below: a) corporate lending to legal entities, b) housing mortgages, c) vehicle and equipment loans, d) equities, e) securities excluding LULUCF* and f) securities including LULUCF.

*LULUCF stands for land use, land-use change & forestry.

This information allows us to focus more on working with companies and other customers to finance solutions that will minimise GHG emissions.

An error was discovered in the first version of the PCAF report published 2 February 2023. The error was discovered the day after publication and corrected immediately in consultation with Deloitte, who audited the report with limited assurance. After the correction, total emissions from the Bank’s credit portfolio decreased by 28.8 ktCO2 equivalents in 2021 and 47.0 ktCO2 equivalents in 2020.

Carbon-offset operation

We have carbon-offset the Bank’s traditional operation in 2022 and renewed our internationally acclaimed certification from CarbonNeutral®. Our operation is carbon-offset through internationally approved actors and the purchase of certified carbon credits. Working with Climate Impact Partners, we have purchased carbon credits that have undergone a strict certification process and have certainly led to carbon sequestration or avoidance of GHG emissions. This allows us to counterbalance our unavoidable emissions. We will nevertheless continue our efforts to reduce emissions from our operation and help customers to do the same.


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