Denmark’s Climate Partnership on Finance

A new approach to engage the private sector in reaching Denmark’s ambitious climate targets led to both increased commitment of capital for green investments from the financial sector and new insights, data, and green investment opportunities.

By State of Green | [email protected]

4 December 2023

Denmark's Climate partnerships

Transitioning to a sustainable economy and achieving net zero cannot be done by governments alone. Partnerships are key. With this notion, Denmark has established 14 climate partnerships placing the private sector at the heart of the green transition.

Learn more about the climate partnerships

While the finance sector itself has a very low carbon footprint, it has a large impact through investments and lending, and, therefore, plays a key role in helping mobilise and shift capital to decarbonise the economy. Building on the Danish tradition for public-private partnerships, in 2019 the Danish government formed 14 climate partnerships to represent key sectors of the Danish economy. Each was tasked with presenting proposals on how their sector could contribute to the country’s 2030 CO2 reduction goal in a just way, supporting Danish competitiveness, exports, jobs, and prosperity.

This resulted in more than 400 recommendations, of which more than 80% have been implemented. One of these partnerships was formed around the financial sector. It was chaired by Torben Möger Pedersen (then CEO of PensionDenmark) with a secretariat headed by Finance Denmark (the business association for banks and mortgage institutions) and Insurance & Pension Denmark (The Danish trade association for insurance companies and pension funds). The Climate Partnership on Finance’s key focus is to make sure the sector plays a pivotal role in providing the finance and investments necessary to ensure a transition to a green economy.

The importance of cross-sector collaboration

Getting closer to other industries and understanding their challenges in achieving emissions reductions was a key motivation for the financial sector. The partnership worked actively to share knowledge with other climate partnerships throughout the entire process to identify the areas that required investments. This cross-sector collaboration proved to be a huge asset for the financial sector, as it leveraged new insights, data, and investment opportunities, and ultimately identified the most relevant financial instruments and initiatives to best support relevant technological developments. It also contributed to making recommendations from the other climate partnerships suitable for investments.

The Climate Partnership’s recommendations

In its report to the Danish government, the Climate Partnership on Finance expressed its commitment to provide financing for initiatives in other sectors, including energy efficiency in buildings, scaling new green technologies such as Power-to-X, and equity financing of large energy infrastructure projects — such as the expansion of offshore wind. As a result, the Danish financial sector has pledged to invest EUR 805 million (USD 850 million) in the green transition over a ten-year period. The partnership also established a framework for Financed Emissions Accounting, which includes principles and methods for their members, and delivered 11 recommendations to the Danish government on how to improve framework conditions for financing the green transition.

Selected recommendations from Denmark's Climate Partnership on Finance

Long-term and predictable frameworks
Establish financing structures involving independent state loan funds that co-finance projects promoting sustainable development to lower investment risk.
Finance innovation, development, and the export of low-emission solutions
Finance innovation and the development of new technologies and new solutions for global climate challenges which can support green growth in the coming years.
Standardisation, digitalisation, and access to data
To finance the green transition, it is critical that the financial sector has easy and inexpensive access to standardised digital data regarding companies and households that need financing. This data needs to be aligned with the EU regulation on reporting for the financial sector.
The role of the public sector
Utilise the role of the public sector as a buyer and construction project owner, and indirectly as a trendsetter to promote the green transition in Denmark.
Increase public funding and venture capital
Increase the use of public funding and venture capital to finance development projects with the potential to reduce global emissions, such as the development of e-fuels and the capture and storage of CO2 (CCS).
Framework conditions in Denmark and the EU on sustainable financing and investments
Continue the work to ensure that EU regulation in the financial field is ambitious, evidence-based, and useful, while limiting administrative burdens on financial and non-financial institutions. Long-term, clear, and attractive framework conditions in Denmark and in the EU play a major role in enabling sufficient investments from the private sector to further accelerate the green transition.

Financing the green transtition

This article is part of the white paper “Financing the Green Transition”. Discover Denmark’s plans to mobilise investments to accelerate the transition to a carbon-neutral and climate-resilient economy.

Explore the white paper