Financial institutions

FS1 Policies that involve analysis of environmental and social factors

A general sector policy for lending through the Bank’s Corporate Banking division was approved by the Board of Directors in 2017 and general sustainability principles in lending to corporates were approved by the Board of Directors in 2018. Landsbankinn’s sector policies contain guidelines on sustainability and ESG factors, including climate risk. Sector policies are in place for the following industries: fisheries and seafood, real estate companies, construction companies, holding companies, the travel industry, commerce, services, IT and telecommunications. Landsbankinn supports customers’ efforts to reduce GHG emissions in order to have a positive impact on their environment. Support from the Bank is primarily in the form of lending to investors.

FS3 Processes to monitor customer implementation of and compliance with the environmental and social provisions of contracts or in business transactions

Supplementary guidelines for investment analysis

Landsbankinn Economic Research gathers information about the activities of listed companies with regard for sustainability and social responsibility. This work is based on a standardized questionnaire that pertains to the main elements of corporate social responsibility, environmental matters and equality. While the responses have been available to investors since June 2017, Economic Research does not evaluate the answers. In the long term, the aim is to give more weight to sustainability and ESG concerns in the evaluation of investment opportunities. This is in line with the Bank’s commitments under responsible investment.

Developing expertise on responsible investment

Experts and analysts from the Bank and Landsbréf have systematically attended courses held by IcelandSIF. Representatives of the Bank and Landsbréf also attended the annual general meeting of PRI. The Bank has also collaborated with the University of Iceland in carrying out specific analysis of the status of responsible investment at Landsbankinn.

Next steps

Landsbankinn and Landsbréf have signed an agreement with Reitun, providing for the Bank and Landsbréf to obtain ESG risk ratings of issuers of equities and bonds in portfolios under management by the latter two companies.

Landsbankinn and Landsbréf have adopted an ambitious strategy for responsible investment, taking into account environmental and social factors as well as governance (ESG) in investment decisions. The objective is to reduce risk and deliver sustainable long-term returns.

This agreement is the next step towards introducing procedures for responsible investment, continuing along the path which the Bank and its subsidiary Landsbréf have set for themselves in recent years.

ESG rating has been a collaborative project of Reitun, Klappir Green Solutions and Thröstur Ólafur Sigurjónsson, associate professor at the University of Iceland, aimed at developing and providing ESG ratings for the domestic market. Internationally, use of such ratings in investment decisions has been growing strongly and domestic investors are rapidly adopting them. An ESG rating assesses how companies perform with regard to environmental aspects, sustainability and governance, showing their strengths and weaknesses, with a quantitative rating enabling their comparison with others. Reitun's services in providing ESG ratings will be based on digital solutions as well as traditional analytics.

G4-FS8 Goods and services intended to achieve environmental benefits

Landsbankinn and the Nordic Investment Bank (NIB) signed a 7-year loan agreement in October 2018 under which Landsbankinn borrows USD 75 million to finance small and medium sized enterprises (SMEs) and environmental projects in Iceland.

NIB is an international financial institution owned by eight member countries: Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden. The Bank finances private and public projects in and outside of the member countries.


FS9 Scope and frequency of reviews and risk assessment procedures

Landsbankinn has a documented process to assess operational risk. All divisions undergo annual operational risk assessment. Operational risk is subsequently mapped on the group level. Where risk is higher than provided for in the Bank’s current risk appetite, mitigating and preventative measures are applied and monitored. Assessment of operational risk extends to all components of operational risk, including insufficient or failing internal processes, human or systemic factors or external events. The assessment is not adjusted to specifically assess environmental or sustainability policies.

Internal Audit is part of the Bank’s risk management platform and of its internal monitoring system. Internal Audit assesses the Bank’s operational efficiency, compliance with external and internal rules, and presents its findings to the Board of Directors. Internal Audit covers all divisions of the Bank, including operational risk and the audit process. International standards body BSI group reviewed the Bank’s compliance with ISO 27001, an international standard for information security management. The Bank also regularly performs internal checks to monitor compliance with the standard. The Bank’s external auditors adhere to standardised practices in their information gathering for audits of the Bank’s consolidated financial statements. This includes review of internal control that applies to the preparation and credible presentation of accounts.


FS11 Ratio of assets analysed to determine environmental or social impact

Emphasis on the integration of social responsibility in core operations

Landsbankinn's Policy on Responsible Investment is based on the United Nation’s Principles for Responsible Investment (UN PRI). Landsbankinn emphasises integrating social responsibility in the investment decisions taken by its asset management team. The Bank has been a member of UN PRI since early 2013. Members of UN PRI oblige themselves to publish a Communication of Progress report on their adherence to the guidelines and the Bank has done so in recent years. PRI further requires that members show development from year to year, in the implementation of their social responsibility policies.

Having regard for ESG factors in the evaluation of investment objectives supports positive returns in the long term and reduces operational risk. The business environment is changing and a company's stance on sustainability and social responsibility has begun to factor in risk assessment, as well as in the evaluation of growth opportunities. In addition, customers increasingly pressure companies to adhere to policies of responsible investment.

Maintaining a dialogue with securities issuers on sustainability can support preventative measures that ensure future benefit for the Bank and investors. Landsbankinn's responsible investment practices thus build on active communication with issuers whereby exclusion is a rare exception.

Landsbankinn has emphasised developing expertise in responsible investment in the domestic market and was one of the founders of IcelandSIF, Iceland Sustainable Investment Forum, in 2017. IcelandSIF is intended to function as an independent forum for discussion and education about responsible investment. The Bank has also endeavoured to build knowledge of so-called sustainable bonds, i.e. green, red and blue bonds, and its employees now possess considerable expertise of these issues.

The market has responded positively to green issuance and there are clearly many opportunities in the field in Iceland. Capital markets are ideally placed to support environmentally friendly undertakings and to make a positive contribution. Landsbankinn collaborated with Municipality Credit Iceland on a green bond framework in 2019. The framework was created to issue green bonds and has been reviewed by Sustainalytics, a leading ESG risk rating firm. According to the review, the MCI’s framework is credible, effective, transparent and in line with guidelines issued by the International Capital Market Association (ICMA). By offering green loans, MCI aims to encourage municipalities to more selectively choose environmental-improving projects that minimise climate change in accordance with the MCI’s environmental policy.

Landsbankinn and Landsbréf have concluded a service agreement with Reitun ehf. that provides for the risk assessment of ESG factors with issuers of both equities and bonds. For more information about ESG rating, scroll up to FS3 - Next steps.

G4-FS13 Access to banking services

All main general banking services are now accessible via self-service channels. As a result, Landsbankinn’s customers have nigh on 24-hour access to general banking services through the Bank’s app and online banking, which both support user interfaces in three languages. Cash services are in many locations available on a 24-hour basis through ATMs and cash machines.

Landsbankinn operates the most extensive ATM network in Iceland, with 88 ATMs in 63 locations throughout Iceland at year-end 2019. In recent years, Landsbankinn has added ATMs that allow for both withdrawals and deposit. All branches in the capital area have FX ATMs, and FX ATMs are also located in Akranes, Akureyri, Höfn in Hornafjörður, Reykjanesbær and Smáralind.

Electronic solutions continue to multiply alongside general technological advances and changes to the Bank’s branch network should reflect those developments, as well as the increased offering of self-service solutions. Solutions based on electronic authentication of customers and electronic consent are under constant development. Already such solutions have multiplied self-service channels which improves access and allows customers to tend to banking business anytime and anywhere. An example of such services is that customers can now alter credit card limits themselves through online banking or the Landsbankinn app. Systematic efforts are under way to instruct customers in the use of self-service solutions and increase access to such solutions in the Bank’s branches. In Landsbankinn's branches, customers are offered instruction in the use of electronic solutions and ATM cash services.

Landsbankinn has the most extensive branch network of any Icelandic bank, with 37 outlets and branches located throughout the country. Further information on the Bank’s branch network, outlets and service visits is available on its website.

G4-FS14 Specialised customer service

In addition to self-service solutions and the services provided in outlets and branches, Landsbankinn makes service visits to certain locations. The Bank has sought new means of ensuring customer access to certain banking service, such as through cash withdrawal agreements with stores. Regard is had for special needs or situation of customers, such as distance to nearest branch/outlet, transport and the special position of certain customer groups, such as senior citizens and individuals who cannot easily seek service at nearby branches or outlets.

Service visits

Vestfirðir Þingeyri, Tálknafjörður, Reykhólahreppur and senior citizen home Hlíf in Ísafjörður, once per week, and Súðavík, every other week.


G4-DMA (FS16) Action to improve financial literacy by target group

The department Business Solutions in Private Banking handles financial instruction to private individuals and supports increased financial literacy. Extensive coverage and education of economic and financial issues takes place through Umræðan, Landsbankinn’s content and news site.

Over a span of several years, Landsbankinn has emphasised providing financial instructions to young people in upper secondary school, both younger students just embarking on their course of study and those about to finish school. This instruction is intended to contribute to increased financial literacy and prepare students for the future. This instruction is available to all upper secondary schools and is carried out in collaboration with the schools' representatives.

In 2019, 48 visits were made to 13 upper secondary schools throughout Iceland, reaching 1300 students. The Bank does not promote its products or services in financial instruction visits to school, only providing general financial advice. Employees in the Bank’s Customer Service Centre have handled financial instruction in the capital area and employees in rural Iceland handle instruction in their area. An effort is made to ensure that younger employees of Landsbankinn handle instruction to upper secondary school students in order to take advantage of peer mentoring.

Landsbankinn is an active participant in the project Fjármálavit, education material in financial literacy for older elementary school students. The project is under the auspices of the Icelandic Financial Services Association and the National Association of Pension Funds in collaboration with members and their employees throughout Iceland. Over a hundred employees from financial institutions, insurance firms and pension funds participated in the project last year, thereof 25 from Landsbankinn. Around 3000 10th grade students participated in the project in 2019. Since its launch five years ago, Fjármálavit has reached 20,000 students.