The Green Bond Review – March 29

    Stockholm (NordSIP) – Inaugurating a new NordSIP feature this week, we bring you what should become a regular update of the green bond market, highlighting trends, new issues and regulatory developments.

    This week, we spoke to Lars Mac Key, who works with Sustainable Products at Danske Bank Markets and he provided us an in-depth update of the green bond market.

    To start with, Mac Key gave us an overview of the European Green Bond market, contrasting the particularities of the Nordic and mostly Swedish market.

    Demand and supply imbalance

    In both the European and the Swedish market, demand for green bonds outpaces supply. On the issuing side, close to 100 issuers have issued just over €100 billion of green bonds denominated in Euros. On the Swedish market, 44 issuers have issued green bonds in SEK, of which 9 were new entrants in 2017. Some of these entities were supranational and chose the Swedish market, due its strong SRI investor base. So far, SEK 140 billion have been issued (€14 billion). The Norwegian market has attracted 15 issuers to date, for a total issuance of NOK 15 billion (€1.55 billion).

    On the demand side, some of the larger European asset managers have dedicated mandates that have allowed for a good investor diversification. Amongst the most green bond-hungry managers are: Actiam, Aegon, Allianz, Amundi, Axa, Erste AM, Humanis, KFW, La Banque Postale AM, Lombard Odier, Mirova and NN Investment Partners. For the Nordic market, Danske estimates that so far, 180 unique investors, of whom 130 are Nordic, have subscribed to the €14 billion of green bonds issued in SEK.

    Shopping for sizes

    In Sweden and Norway, the benchmark size for single bond issues is SEK/NOK 1 billion (€100 million), which is smaller than the Euro benchmark which stands at €500 million. The Nordic markets therefore offer diversification possibilities for smaller issues. The smallest size on the SEK market so far was SEK 100 million (€10 million) and the in fact the largest was the same size as the Euro benchmark size at SEK 5 billion.

    According to Danske, there are many international investors interested in the range of Nordic issues. An Investment Grade rated issuer can often attract some 10-40% of non-Nordic interest when issue size is above SEK 1 billion. If the size is above SEK 2.5 billion, it may be included in the MSCI Barclays Green Bond index and additional investors may take notice.

    Attracting corporate issuers

    As illustrated by the graph provided by the team at Danske Markets, the green bond market shows healthy development signs as the proportion of supranational issuers decreases compared to the proportion of corporate issuers. Three months into 2018, the level of corporate deals has well exceeded half of the level achieved over the entire 2017 year. This means that the instrument is working its way into more places where green projects can be developed. It also shows that, while corporates may find it easier to issue regular ‘non-green’ bonds, they don’t shy away from the green bond market, when they decided to develop projects that can be earmarked.





    Images © Danske, NordSIP

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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