In conversation with Ms Signe Krogstrup, Governor of Danmarks Nationalbank

1. When and why did your institution join the NGFS? 

Danmarks Nationalbank joined the NGFS in April 2019. At the time, climate change was still a new topic for central banks. As a small central bank, we wanted to team up with others to pool resources and build skills. Our goal was to better understand the risks we face and how to handle them in our work. We also recognized that climate change is a global challenge that demands global cooperation. No single institution can take this on alone.

2. Can you share with us the key elements of Danmarks Nationalbank’s climate strategy? 

Rising climate risks demand attention across all of Danmarks Nationalbank’s tasks and operations. Our aim is not to treat climate change as an add-on or a separate strategy. We want climate considerations integrated into everything we do. We prioritize climate risks alongside other risks like cyber security and geopolitics. Many of these risks interact, so we need a broad and connected approach. There is a lot of uncertainty around these risks, but one thing is certain: climate risks are growing.

Our climate work covers analysis, data collection, internal operations, relevant investments, and green bond issuance for the government. All of these efforts rely on strong engagement in both international and domestic climate partnerships.

In our analysis of economic and financial risks, we have published work on for example flooding risks, energy price volatility, and how carbon pricing affects the economy and the financial sector. Because comparable and reliable data are in short supply, we also help improve data availability, for example by publishing statistics on carbon emissions financed by the Danish financial sector’s investments.

When we invest our foreign exchange reserves, we do so responsibly, while keeping our fixed exchange rate policy and financial stability as the most important priority. Our approach to responsible investment reflects Denmark’s climate ambitions. We report annually on the climate footprint of both our financial portfolios and our internal operations. Internally, we focus on using resources sustainably and reducing our greenhouse gas emissions. We do this, for example, by optimizing our IT servers and databases and in the supply of banknotes and coins.

As Denmark’s debt manager, we issue green bonds for the Kingdom of Denmark. This is separate from our central bank role. In September, Denmark became the first sovereign to issue under the European Green Bond Standard (EuGB).

3. To which extent did Danmarks Nationalbank leverage the work of the NGFS in its own domestic journey? Any concrete examples? 

Since joining the NGFS, we have benefited most from talking directly with central bank colleagues around the world. We learn from each other’s experiences, share best practices, and make good use of the group’s expertise and analytical work. This global platform of committed central banks and supervisors is what makes the NGFS unique. At Danmarks Nationalbank, colleagues take part in all NGFS workstreams. For example, we contributed actively to and used the NGFS guidelines on climate-related disclosures developed by the Workstream on Net Zero for Central Banks.

4. One last word? 

Today, efforts to tackle climate change face pushback in many places. Climate policies often seem to compete for attention with other important priorities. In reality, these agendas often overlap. And climate change is no longer just a risk; it is already happening. Climate-related risks affect economic and financial stability. They differ from other risks because we know they will materialise, the uncertainty lies in when and how.

Governments and fiscal authorities are best placed to deliver solutions, especially through carbon pricing. Central banks have a different, but crucial, role. We help provide the stability needed for a successful green transition and for adaptation efforts. We look forward to continuing this work with our fellow NGFS members.