New Green Bond Program at Kommuninvest

    Stockholm (NordSIP) – On Monday, Kommuninvest issued its fourth green bond, and the second one in Swedish kronor. This time, the issue amounted to SEK 3 billion.

    Danske Market’s Lars Mac Key comments: “This was the second largest SEK green bond to date in 2018. Priced at 3bp trough Kommuninvest’s bench curve with a very strong order book of SEK 4.5 billion by many of the true green bond investors.”

    Kommuninvest is a Swedish-based Local Government Funding Agency, which aims since 1986 to help municipal governments to raise capital through the issuance of bonds. The initiative, governed by a cooperative of municipalities, makes it possible for single municipalities to access capital from around the world.

    The green bond was bought by both domestic and international investors. Among the investors mentioned by Kommuninvest are Affirmative Investment Management, AI Pension, AP7, Blackrock, Danske Capital, Folksam Group, Länsförsäkringar Bank, Nordea Fonder, PostFinance AG, Raiffeisen KAG, SEB Funds, Swedbank Robur and Öhman Funds.

    Since the launch of its green bond program in June 2015, Kommuninvest has issued SEK 17.4 billion in green bonds, making it the largest Swedish issuer. Four green bonds have been issued so far, two of them in Swedish kronor and two in US dollars.

    In a press release, Thomas Bäck, portfolio manager at Swedbank Robur, says he believes that green bonds are suitable for investors who want to deliver more than just financial returns to their customers. In Swedish he says: “By investing in a strong sustainable issuer like Kommuninvest, we ensure that we get the best possible green bonds to our funds. Their work on transparency in impact reporting makes it easier for us to make a sustainable choice for our investments and provide a long-term sustainable return to our customers.”

    According to Kommuninvest’s green bond framework, the aim is to address six of the 17 Sustainable Development Goals (SDGs).

    #6  Clean Water and Sanitation
    #7 Affordable and Clean Energy
    #9 Industry, Innovation and Infrastructure
    #11 Sustainable Cities and Communities
    #13 Climate Action
    #15 Life on Land

    Earlier this month, Kommuninvest highlighted that “Some 150 green investment projects financed by Kommuninvest green bonds contribute to reduce or avoid nearly 515,000 tonnes in annual carbon dioxide emissions, according to the issuer’s second green bonds impact report. This corresponds to emissions of approximately 350,000 cars with an annual mileage of 12,000 kilometres.”

    According to the statement, Kommuninvest has built up a portfolio of 146 eligible green projects in 80 Swedish cities and regions, with commitments totalling SEK 26.6 billion (US$ 3.2 billion) and disbursements totalling SEK 19.9 billion (US$ 2.4 billion) as of 31 December, 2017.

    Christian Ragnartz, Head of Debt Management at Kommuninvest says (in Swedish):
    “Green bonds are on the rise and we are pleased to be able to contribute with this year’s second largest transaction in Swedish kronor. Investors include reputable green investors, both Swedish and international. Investors accepting lower interest rates show that sustainability has a clear value, and it facilitates Kommuninvest’s support for the municipal sector’s green conversion.”

    Tomas Werngren, CEO of Kommuninvest, is convinced that the municipal sector can make significant contributions to the creation of a green financial market, which is seen as an important element in achieving global climate goals.

    “The municipal sector invests for over 150 billion a year,” he says (in Swedish), “often in climate and environment-related projects such as buildings and energy infrastructure. The fact that so many municipalities now choose green bonds for their investments testify to a strong interest for the measures taken to address local and global climate challenges.”

    Lending manager Björn Söderlundh estimates that 15-20 percent of Kommuninvest’s total lending can be green within a few years, or approximately 45-65 billion with current lending volume. Currently, the share is about 6 percent.

    “In a large part of Swedish municipal investment there is a clear focus on sustainability and environmental benefits,” says Björn Söderlundh. Many municipalities are interested in obtaining an eco-label on loans that finance these investments.


    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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