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    Danske Bank in Nuclear Hot Water?

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    Stockholm (NordSIP) – Following reports from Danish financial media, NordSIP has confirmed that Danske Bank is listed as part of an international group of financial institutions that signed two credit agreements with Honeywell International Inc, according to a SEC 8-K report dated March 21st, 2023.

    The emergence of this disclosure is problematic because it stands in contrast with Danske Bank’s exclusions list, which includes Honeywell International Inc as one of the companies in which Danske Bank Group has decided not to invest for sustainability reasons.

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    Honeywell International Inc and Nuclear Weapons

    Honeywell International Inc is an American industrial company providing aerospace, building technologies, performance materials and technologies, and safety and productivity solutions. The company is, through its subsidiary Honeywell Technology Solutions Inc, responsible for repair, development, calibration, operations and maintenance of instrumentation and recording of data from simulated nuclear detonations at White Sands Missile Range in New Mexico. Among others, Honeywell produces components for Trident II nuclear missiles.

    According to the International Campaign to Abolish Nuclear Weapons (ICAN), an NGO that won the Nobel Peace Prize in 2017, Honeywell International made over US$16 billion from nuclear weapons contracts in 2019, coming third behind Huntington Ingalls Industries and Lockheed Martin. According to the Don’t Bank on the Bomb report by PAX, a Dutch anti-war organisation, “Honeywell operates four sites for the US Department of Energy and the National Nuclear Security Administration through joint-venture partnerships: Kansas City National Security Campus, Nevada National Security Site, Sandia National Laboratory and Savannah River Site.”

    Honeywell International Inc is perhaps not the most controversial investment. AP3 does not exclude the company, and reportedly held SEK507.8 million worth of Honeywell stocks in 2021. It is not however without controversy. Norwegian pension fund KLP has excluded the company since 2006.

    The Credit Agreements and Danske Bank

    According to the SEC disclosures, Danske Bank has made a commitment to provide 1.45% of a 364 day credit agreement worth an aggregate total of US$1.5 billion, and approximately 1.43% of a 5-year credit agreement with an aggregated total of US$4 billion.

    31 other banks participated in these credit agreements, including Santander, HSBC, BNP Paribas, Societé Générale, Royal Bank of Canada, Bank of America, Citibank, Goldman Sachs, JP Morgan, Mizuho and MUFG Bank. To be clear, it appears that the contracts describe a credit line. These are not loans or bonds. It is an agreement to provide a loan on specific terms should Honeywell International require it.

    The problem with Danske Bank’s participation in these two credit agreements is that the bank has an exclusions list that explicitly singles out Honeywell International Inc for its “Involvement in Non-Ethical & controversial activities and sectors”.

    Danske Bank’s Perspective

    When contacted for comment on the reports of the deal with Honeywell, Samu Slotte, Global Head of Sustainable Finance at Danske Bank, did not deny nor confirm the relevance of the companies exclusion list. However, he pointed to the bank’s policy regarding nuclear proliferation and exclusions as making allowances for certain exceptions.

    Samu Slotte, Head of Responsible Investments, Danske Bank

    “We never comment on specific customer relationship and we can therefore not comment directly on the questions asked regarding Honeywell International. What I can say, is that we asses all credit cases related to weapons and arms to our position statement for Arms and Defence. In this policy we have clearly stated, that Danske Bank does not provide credit to companies involved in activities relating to nuclear weapons outside of the non-proliferation treaty. In the policy we also clearly state, that companies with activities relating to nuclear weapons within the non-proliferation treaty are not excluded from having a credit. However, we have made the decision to make further restrictions for companies who have become customers of the bank after 2019 and have activities related to nuclear weapons within the non-proliferation treaty. For those customers a maximum 5% of their total revenue can come from military activities. These defined criteria are used in all business-cases,” Slotte replied to NordSIP via email.

    What’s the Point of an Exclusions List?

    When we confront Slotte’s argument with Danske Bank’s exclusion list, the question that emerges is “What’s the point with Danske Bank’s exclusion list?”

    If both Danske Bank’s detailed list of exclusions and its more vague exclusions policy are relevant for the credit agreement signed with Honeywell International Inc, and if they can be interpreted contradictorily, then the Danish bank needs to devise a manner to clarify which document takes precedence.

    Logic would seem to suggest that the most detailed document that specifically focuses on the affected company should take precedence. It seems in this instance that that was not the case.

    However, if the exclusions list does apply to the Honeywell International Inc credit agreement, it still seems somewhat paradoxical that Danske Bank should consider companies to be unethical for some contracts but not for others.

    Images courtesy of AlexAntropov86 and Danske Bank
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