Green finance

Arion Bank has adopted an environment and climate policy, and in the last few years we have added to our service offering green financial services, such as green car loans, business loans, deposits and mortgages. We have published a Green Financing Framework which applies to the Bank’s financing and lending. By doing so the Bank has pledged to use the capital it obtains on the credit markets through the Green Financing Framework to provide green loans to corporate and retail customers as defined in the framework. Furthermore, the Bank has prepared an impact and allocation report which sets out how this capital is used in green projects.

Green Financing Framework

Banks perform a vital role in funding progress, and at Arion Bank one of our focuses is funding projects on sustainability and green infrastructure.

The Green Financing Framework, which the Bank published in 2021, plays a key role in the Bank’s ability to finance green loans to individuals and companies. The Framework has added to the Bank’s funding mix through the issue of green bonds and raising of green deposits and has also broadened the Bank’s range of environmentally friendly products, which now encompasses green car loans, mortgages, business loans and deposits. Projects eligible for green loans include energy savings, the transition to green energy in transportation, certified properties, sustainable fisheries, emission controls and renewable energy.

In order for a project to be eligible for green loans it needs to meet the requirements set out in the Green Financing Framework, and stricter demands are made in terms of information on non-financial areas indicators.

In connection with the Green Financing Framework, Arion Bank engaged the engineering firm Mannvit to analyze the Bank’s mortgage portfolio and to propose what could be categorized as a green mortgage in Iceland. It represents the first report of its kind in Iceland and it is a vital contribution to the discourse on green buildings and their future on the domestic property market. Approximately 13% of residential housing which Arion Bank has financed matches Arion Bank and Mannvit’s definition of green residential housing and environmentally certified housing.

The Green Financing Framework has been assessed by the Norwegian ratings agency Cicero which rated the framework as Medium Green and rated governance as Good. Deutsche Bank advised on the framework. The Green Financing Framework is based on the latest Green Bond Principles of the International Capital Market Association, ICMA. It also draws on the EU Taxonomy and the UN Sustainable Development Goals.

Green savings

In 2020 Arion Bank announced the launch of a new green deposit account called Green Deposits, the first Icelandic bank to offer such an account. At the same time the Bank developed a special financing framework for green deposits which was later incorporated into the Green Financing Framework. Green Deposits is a new savings account designed for individuals, NGOs and companies wanting to contribute towards a greener future. The account is a non-indexed demand account, which means savers can withdraw their money whenever they want.

The response to Green Deposits has exceeded all expectations, and at the end of 2022 total deposits amounted to more than ISK 21 billion, up from ISK 8 billion at the end of 2021.

Open account for Green Deposits

Growth of green deposits
ISK bn.

Status of total committed
green finance at the end of 2022

Green lending increased during the year and now represents 12.5% of the Bank’s total loan portfolio, compared with 11.3% in 2021. The Bank aims to raise this figure to at least 20% by 2030.

By setting this target the Bank seeks to increase its green lending so that the annual growth rate of the green loan book is double the growth rate of the Bank’s total loan book. This target will be reviewed annually and will take into consideration the opportunities over the next few years for green financing and the implementation of EU taxonomy in Iceland. The Bank hopes the growth rate might even exceed the target figure. Since the Green Financing Framework was issued, the Bank has held four green bond issues, both in Iceland and internationally. Two of these green issues were held in 2022. Firstly, a ISK 8 billion Icelandic bond issue, and secondly a €300 million issue in September. Total committed finance in 2022 was approximately ISK 151 billion at the end of 2022, compared with approximately ISK 130 billion at the end of 2021. The Bank’s total green instruments amount to ISK 118.7 billion, compared with ISK 55.4 billion in 2021.

Another positive development in recent years has been the increase in the proportion of electric cars in the Bank’s total loan portfolio. In 2021 this figure was just below 15% but is now almost 22%. The percentage of loans to buy vehicles categorized as 100% electric cars or plug-in hybrids now represents 40% of total car loans.

While good progress is certainly being made, there is always room for improvement. The Bank encourages its customers to take more eco-friendly options where possible, for example by waiving loan origination fees on green car loans.

Arion Bank’s green financing – total bond issues and deposits
ISK bn.
Total committed green financing
ISK bn.

Green lending by category in 2022

On balance sheet

Off balance sheet


Sustainable fishery and aquaculture




Clean transportation




Green buildings




Energy efficiency




Pollution prevention and control








Committed finance by category (on/off balance sheet)

Key figures on green financing

committed financing



Total green



Target on percentage of green loans to retail and corporate customers in 2030


Reviewed annually to incorporate opportunities for green financing

Sustainability policies for different sectors

In 2022 we devised our first sustainability policy on lending to different sectors of the economy. The first policy, a seafood sustainability policy, was approved by the Bank’s sustainability committee at the beginning of 2023, and we will publish more policies for key sectors in 2023. These polices enable us to better support and motivate of our customers on their journey towards a sustainable future.

Arion Bank's sustainability policy on seafood 


Financed emissions

Arion Bank is a signatory to the Partnership for Carbon Accounting Financials (PCAF). This is a global partnership of financial institutions that work together to develop and implement a harmonized approach to assess and disclose the greenhouse gas (GHG) emissions associated with their loans and investments. At the end of 2022 Arion Bank published its first report on financed emissions which is based on PCAF methodology. Assessing and disclosing the GHG emissions which are financed through lending and investments is a prerequisite for the Bank’s ability to set targets on reducing emissions, and this is the next step.

Financed emissions at Arion Bank in 2021

Risk related to climate change

In order to gain a better overview of the risk related to climate change the Bank has for the third time made use of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The section on sustainability risk in the Bank’s 2022 Pillar 3 Risk Disclosures is partly based on these guidelines and it also contains an analysis of the Bank’s loan portfolio from the point of view of climate risk. The Bank formally became a signatory to TCFD in February 2022. 

Impact and Allocation Report

At the beginning of 2022 Arion Bank published an Impact and Allocation Report for the Bank’s Green Financing Framework for 2021. The sustainability team at EY in Iceland advised on the report and also carried out the calculations of the environmental and climate impact of green projects. The report specifies the allocation of funds raised through green bond issues and green deposits in 2021, and there is also a section on the positive environment and climate impact of green projects at Arion Bank. Deloitte also provided confirmation with limited assurance of the allocation of funds to green projects which have been raised through green bond issues and green deposits. It is planned to publish an Impact and Allocation Report for 2022 in the first half of 2023.

Impact and Allocation Report for 2021

Responsible fund management

The role of Arion Bank’s subsidiary Stefnir is to manage the financial assets of its clients as best serves their interests in the short and long term. The company has pioneered the development of new funds and investment options over the last decade and is a market leader in terms of implementing good corporate governance and ESG strategy.

Responsible and diverse investment options and thorough disclosure of information are central to the corporate social responsibility to which Stefnir is committed. By paying due attention to environmental and social issues and good corporate governance the company believes it can have a positive influence on our society, to the benefit of fund members and other stakeholders.

Further information on responsible investment at Stefnir can be found here.

Stefnir - Scandinavian fund - ESG

The fund takes into account ESG factors when making investment decisions with the aim of reducing risk and generating long-term sustainable investment returns. A special ESG risk assessment is performed on all assets and investment options by the fund’s investment team and independent third parties.

The fund is managed by applying the methodology of responsible investment. Investment decisions are guided by those UN Sustainable Developments Goals which align well with the fund’s investment strategy. These goals are: good health and well-being, gender equality, affordable and clean energy, innovation and infrastructure, responsible consumption and production and climate action. The fund was been rated AAA by MSCI.


Stefnir -Green Selection

Stefnir - Green Selection is a mixed UCITS which primarily invests in domestic and international shares and corporate bonds issued by companies which are guided by ESG factors in their operations. The goal of the fund is to generate long-term sustainable investment returns.

More information on the fund


Stefnir - Sustainable Fixed Income Fund

The fund’s investments seek to generate returns on a portfolio of domestic and international bonds issued by governments, companies, financial institutions, public authorities or other companies with the goal of sustainability. This goal might mean having a positive environmental impact as well as positive social impact.

More information on the fund

Stefnir - Sustainable Arctic Fund

The objective of the fund is to invest primarily in listed equity of companies active or with operations in the Arctic. The fund does not aim to reflect any particular index. The fund makes investments in accordance with Stefnir’s policy on responsible investment and evaluates environmental, social and governance factors in its decision-making on investments.

More information on the fund.