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On June 8, 2026, Denmark's Financial Supervisory Authority (Finanstilsynet) published a report addressing credit risk management practices related to environmental, social, and governance (ESG) factors. The report follows inspections conducted in 2025 of Denmark's largest banks, which revealed gaps in how these institutions identify, analyse, and manage ESG-related credit risks. The Financial Supervisory Authority identified several key areas requiring improvement across the banking sector. Institutions must identify material ESG-related credit risks by assessing both physical risks (such as extreme weather events) and transition risks (such as regulatory changes), tailored to each customer's industry and creditworthiness. Portfolio analyses must incorporate stress-testing scenarios beyond mild cases, with scenario selection anchored in management oversight. ESG-related credit risks must be integrated into credit policies and operational procedures, supported by relevant data collection and analysis. When assessing individual customers, institutions should distinguish ESG-related credit risks from broader sustainability considerations, focusing only on factors affecting creditworthiness and loss risk. The Financial Supervisory Authority emphasised that staff must possess adequate knowledge to identify, analyse, and communicate ESG-related credit risks, which can be strengthened through targeted internal training. Institutions require effective controls across first and second lines of defence to ensure quality and operational implementation of ESG risk assessments. The guidance applies to all institutions managing ESG-related credit risks, though the inspections specifically examined Denmark's largest banks. The Financial Supervisory Authority's oversight approach is risk-based, prioritising protection of depositors' interests, confidence in financial institutions, and financial stability. Individual inspection reports have been published separately. The full report is available on the Financial Supervisory Authority's website.