Jyske Bank will always need a large, strategic investment portfolio. The primary purpose of the portfolio is to have a large statutory liquidity buffer. However, every now and then, the investment portfolio will be larger than the statutory liquidity buffer. This will be the case, especially when the bank’s deposits significantly exceed loans and advances. Therefore, when the bank has an ample liquidity, investment will also be made in securities that are not directly included in the statutory liquidity buffer. Such investments comprise various types of securities.
The majority of Jyske Bank's liquidity buffer consists of investments in Danish mortgage bonds. The majority of these primarily finance Danish properties, secondarily Danish agriculture and a small proportion shipping industry. Because of the focus on Danish mortgage bonds, our liquidity buffer will generally be at a relatively low level in relation to CO2 emission intensity. We integrate CO2 in our investment decisions by considering the exposures on a sector basis, of course under due regard to current liquidity requirements. Our projections indicate that CO2 emission relating to our investments in Danish mortgage bonds can be reduced by 40% over the period from 2019 to 2030. The reduction is primarily expected to be achieved because of lower emission factors from the Danish housing stock due to improving Energy Performance Certificates and a higher degree of renewable energy supply. If the projection is realised, no significant changes are to be expected in the bank’s exposure to mortgage bonds.
The remaining part of the liquidity buffer is invested in bonds issued by European governments or other public sector entities. Therefore, the portfolio generally supports societal needs. Moreover, to a modest degree, the portfolio includes specifically sustainable bonds.
The remaining part of the strategic investment portfolio
The part of the strategic investment portfolio in excess of the bank’s liquidity buffer consists mainly of corporate and mortgage bonds in the form of CLOs, which are portfolios of underlying corporate loans selected and managed by an external fund manager. In connection with new investments, the fund manager’s handling of ESG issues is an important component. Hence it is a condition for investments that fund managers, by using either external or internal sustainability ratings, structurally address all three components of sustainability when composing a portfolio.
The investment portfolio contains a limited number and to a limited extent corporate bonds. In the specific cases, the same standards will apply when assessing ESG issues as the ones applied to the Group’s loans and advances.
Jyske Bank has made the strategic choice not to include individual shares in its investment portfolio, and therefore no sustainability guidelines apply to shares, and as Jyske Bank has generally opted out of such investments, exposures to controversial sectors and companies will be avoided.
For risk management purposes, Jyske Bank may now and then have limited positions in equity indices. Due to the nature of exposures at index level, the bank uses the most liquid indices and, for the time being, there is no particular sustainability focus on this part.