Report launch today in Stockholm
First comprehensive overview of all Nordic green bonds issued in each nation since market inception.
2017 issuance reaches new record. Plenty of headroom for growth.
What’s it all about?
The Climate Bonds Initiative has just released its first report examining green finance developments in the Nordic countries. The Green Bond Market in the Nordics was launched in Stockholm today at Handelsbanken’s 4th annual Green Bonds and Sustainable Capital Markets conference, co-hosted with Nasdaq Stockholm.
Commissioned by Handelsbanken, the report provides an overview of the region’s green bond market and sets out our analysis by issuer type, financed sectors and countries. It also identifies Nordic issuers of vanilla bonds in industry sectors conducive to green bond issuance and outlines avenues for market development.
Nordic countries leading by example
The Nordic countries have evolved in the context of the Nordic Model, which is based on decentralisation and cooperation across countries and municipalities to enhance the effectiveness of service delivery. Against this background, the region was able to position itself at the forefront of integrating environmental and sustainability targets within budgets at a central and local government level.
Nordic banks have been among early movers, the Nordic Investment Bank (NIB), a supranational, and Norwegian state bank KBN Kommunalkredit were among the very first to start issuing green bonds, both debuting way back in 2010.
Other notable firsts
Several other significant green finance milestones have come from the region: the first green city bond (City of Gothenburg), the first corporate green bond and the first green bond from a real estate company (Vasakronan), and first labelled Green MTN corporate bond programme (Fabege), to note a few.
Gothenburg and Vasakronen were amongst the organisations recognised at our inaugural Green Bond Pioneer Awards in 2016.
Nordic stock exchanges have also contributed to the green bond market’s development. Oslo Bors and Nasdaq Stockholm were the first stock exchanges to introduce dedicated green/sustainable bond segments in 2015.
The region is a leader in the use of external reviews, a contribution to promoting market integrity and best practice at a global scale. Over 98% of outstanding green bonds benefit from a Second Party Opinion (SPO), with the only exception being NIB bonds issued prior to Q3 2014.
More recently, in October 2017, ten Nordic public sector issuers published a Position Paper on Green Bond Impact Reporting. The guide seeks to harmonise the approach to impact reporting to enhance market transparency.
The Nordic green bond market in a global context …
- Despite their relatively small size, Nordic nations rank highly on a global scale, with Sweden at 6th, Norway 16th, Denmark 17th and Finland 20th place by cumulative issuance.
- The Nordic Investment Bank (NIB) is the region’s largest issuer to date.
- Nordic nations including supranational NIB, account for 6.7% of global cumulative green bond issue volume and 18.5% of European issuance.
…and its regional evolution
- 2017 global rankings also reflected high levels of issuance with Sweden at 6th, Denmark 16th, Finland 19th and Norway 23rd.
- Annual issuance broke a new record in 2017 at EUR7.8bn, 64% up from 2016 and 10.5 times higher than the 2013 total.
- Fifteen new green bond issuers entered the market in 2017.
- Corporate issuance was boosted by large deals from Danish energy company Orsted and three commercial banks – Nordea, SEB and Swedbank.
- Swedish property company Atrium Ljungberg, a newcomer to the market became a repeat issuer during the year.
Use of proceeds & Issuer sectors
In 2017 Renewable Energy (31%) and Low Carbon Buildings (31%) dominated. Green bond proceeds were also allocated to Low Carbon Transport (13%), Water and Waste Water (7%), Waste Management (8%) Land Use (7%) and Adaption (3%)
Local government, local government funding agencies, government-backed entities, state banks and supranational NIB account for two thirds of overall Nordic green bond issuance. The private sector covers the remaining one third.
There is a clear opportunity for private entities, especially financial institutions, to take up a bigger role in green bond issuance.
Who’s saying what?
Tobias Lindbergh, Head of Sustainable Finance at Handelsbanken DCM:
“There is significant activity and development in the Nordics. Handelsbanken is proud to have contributed in this market for many years, assisting numerous clients on the development of green bond frameworks and further advancing standards in this growing asset class.”
“Nordic issuers and investors are very focused on ESG and green investments and we foresee continued strong growth in the foreseeable future. The time had come for an independent study to be done on the Nordic market and it was important to us that we contribute to such a project.”
“This report provides a basis for further discussion amongst issuers, investors, public entities and policy makers on green finance and sustainable investment. We are pleased to have been able to support the Climate Bonds Initiative in its production.”
Several sector opportunities for increased green bond issuance have been identified including:
- Public sector issuers could tap the green bond market for projects such as upgrades, network and capacity improvements for public transport. Rail is easily aligned with a low-carbon transition;
- Financial institutions could step up their efforts to finance loan pools linked to a wide range of climate-aligned sectors, as well as more targeted deals such as covered bonds and energy efficiency mortgages;
- Investments in Low Carbon Buildings are expected to keep growing, as current private sector issuers keep returning to market. Housing, specialised real estate and public infrastructure companies are also expected to add scale.
- Opportunities exist in sustainable forestry with FSC related assets suitable for green issuance.
- Within the Water and Waste Water sectors there are existing bond issuers who could follow up vanilla bonds with new green issuance.
The Last Word
The Nordic Model has served well as a back drop for the public and private sector driven green investment reflected in Green Bond Market in the Nordics, with subnationals and cities prominent.
Two Nordic based banks made their the first moves almost a decade ago. As we identify in our Seven Seven Trends for 2018 pressure will increase on the global banking sector to lift green lending.
Internationally, there's a bit of catching up to do, a point made by Christiana Figures during COP23 in Bonn when annual green issuance passed the $100bn mark for the first time.
Today's report, together with yesterdays release of the groundbreaking Nordic and Baltic Public Sector Green Bonds scoping study, give a comprehensive picture of green investment built in large part at the local level, from the ground up.
We’ll leave the final comment to Sean Kidney:
“Nordic nations have been at the forefront of green bond market development in Europe and worldwide, maintaining a presence in the Top 20 of issuing nations is a significant achievement.”
“Continued policy measures to promote environmental sustainability and low carbon development with support from institutional investors and stock exchanges can help maintain the momentum.”
“In combination with existing public sector green investment directions, more aggregation structures and sovereign issuance, a new phase of accelerated green finance could emerge between now and 2020.”
‘Till next time,
Disclosure: Handelbanken is a member of the Climate Bonds Partner Program. More information is available here.
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