Nordic and Baltic Public Sector Green Bonds

The Climate Bonds Initiative has published a comprehensive study on the Nordic and Baltic Public Sector Green Bonds, exploring the contribution of sub-national public sector entities to green finance in selected Northern European countries. The study was conducted with the support of the UK Foreign & Commonwealth Office.

The report has a specific focus on the role of local governments, municipally owned companies (MOCs), state-owned enterprises (SOEs), and Local Government Funding Agencies (LGFAs) and along with Scandinavian nations includes Estonia, Latvia and Lithuania in its scope.


Download the full report here.


Public sub-national entities account for 48% of green issuance

The Nordic and Baltic green bond market has experienced steady growth, with 2017 total issuance up 70% compared to 2016 and 11 times higher from market inception in 2013.

The public sector - local governments, MOCs, SOEs, and LGFAs - accounts for a large portion of the region’s green bond market, with issuance to date amounting to EUR9.4bn, or 48% of the total.

With the region’s local governments characterised by a high level of fiscal autonomy and LGFAs dominating public lending, the public sector is well positioned to fund climate action at a sub-national level through increased green lending and green bond issuance.


Download the full report here.


Opportunities for further growth                    

At a city or municipal level, domestic issuance in local currency is common, due to low funding requirements. However, the use of green bond programs is on the rise and an increasing number of issuers are listing their bonds internationally. Stockholm’s Läns Landsting and the cities of Gothenburg and Malmö (Sweden) are all repeat issuers on the London Stock Exchange (LSE) and are among 28 Nordic issuers quoted on its green bond segment.

Local Government Funding Agencies (LGFAs) play an essential role, especially in the Nordics, acting as aggregators of funding that would be too small to enter the market directly. Their outstanding green bonds are typically benchmark size and listed on the LSE or Luxembourg Green Exchange (LGX).

At present green bonds still represent a very small portion of LGFAs issuance. There is a clear opportunity for them to increase green lending to provide further support for sub-national and city based climate action.