The Green Bond Review – April 6

    Lars Mac Key, Danske Markets

    Stockholm (NordSIP) – Following up on our debuts last week, we bring you some more insights from Danske’s Lars Mac Key, who gave us a perspective on what to expect in 2018 at the global level. Are there any low hanging fruits? Where are the next issues most likely going to come from?

    Themes to watch

    Industrial Energy Efficiency

    Worldwide, industrial processes have not reached their full potential when looking at possible energy savings. The main sectors to watch are highly energy intensive industries, such as steel manufacturing and building.

    Agriculture and Forestry

    Forestry in the Nordics is often viewed as a green investment, as the cut trees are replaced by new plants, and often the wood is not directly used in energy production. This means that the CO2 captured by the tree continues to be stored in the wood, and durably so when is serves as construction material. However, in many other parts of the world, deforestation is still an important issue and the global emissions reduction plan largely depends on solving it. Agriculture is also one of the largest contributors to greenhouse gas emissions. Danske says, “Organic labelled agriculture has a great potential in the green bond market. We also hope Climate Bond Initiative will finalise standards for both Forestry and Agriculture.”

    Covered Bonds and Green Mortgages

    Covered bonds, which are collateralised against a pool of assets that can cover claim if the issuer fails, represent a opportunity for the green bond market.

    Today many investors agree that the biggest challenge in the green bond market is data. Bringing answers to this issue has also become an interesting opportunity for several actors. At the same time standards are being developed, specifically for many sectors but also for different types of bonds, such as green mortgages and also Green Covered bonds. The European Mortgage Federation/European Covered Bond Council are busy working on these standards at the moment.

    Energy efficient mortgages could play a central role in Europe’s new strategy for sustainable finance, states a White Paper published under the EU funded ‘Energy Efficient Mortgages Action Plan’ (EeMAP) Initiative – which sets out key recommendations towards the creation of an energy efficient mortgage product for Europe.

    Social & Sustainability Bonds

    The International Capital Market Association (ICMA) introduced a set of Social Bond Principles in June 2017, including the Sustainability Bond Guidelines. Since then number and volume of social and sustainability bonds increased, according to Danske. “The potential of, predominantly, Sustainable Development Goals linked bonds as well as affordable housing linked bonds this category will continue to grow. This is what happened to green bonds introducing Green Bond Principles in 2014.”



    Pictures © Shutterstock – Irina Fischer, 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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