Stockholm (NordSIP) – The Climate Bonds Initiative, the international, investor-focused not-for-profit organisation working on mobilising the $100 trillion bond market for climate change solutions, has released a new report examining the latest green bond market developments in Europe both at the regional and country level.
“The Green Bond Market in Europe 2018”, sponsored by White & Case, surveys green bond deal features, including an overview of issuer and bond types, external reviews and certification, the use of proceeds analysis, and the role of government and of financial institutions at country and regional levels.
The report finds that “strong political impetus is expected to continue driving market evolution and improvement, such as through the adoption of a common EU green asset taxonomy in 2019 as part of the [EU] Commission action plan on sustainable finance, banks implementing the reporting recommendations set out by the Financial Stability Board’s Taskforce for Climate-related Financial Disclosure and starting to green-tag loans.”
As was also documented in the CBI’s February Green Bond Market in the Nordics report, this report designates Nordic countries as being “at the forefront of sustainability and defining green”, with sustainability targets integrated into local and central government budgeting and in key laws, such as building codes. This enables Nordic institutions to make substantive contributions to the green bond market, the report suggests, with a “high use of external reviews and strong focus on impact reporting [setting] best practice standards.” Among other findings,
- Sweden is designated as the largest, most diverse market with repeat issuers, with 10 new issuers debuting in 2017 and Vellinge Municipality and Klövern joining the market in Q1 2018. The housing sector is being watched as the next segment to seriously start issuing green bonds, while expectations are rising that Sweden will issue a green sovereign in 2018 following the government “To Promote Green Bonds” inquiry earlier this year.
- In Finland, local government funding agency MuniFin dominates issuance with its three bonds. Fingrid became the first corporate to issue a green bond in a €100 million deal, while export credit agency Finnvera and investment outfits Finnfund, Governia Oy and TESI Finnish Industry Investment are candidates to issue the next green bonds. The cities of Helsinki, Espoo, Tampere, Vantaa, Oulo and Turku may band together under the auspices of 6Aika to issue bonds jointly.
- Norway’s diversified green bond market saw 4 entrants in 2017, and SpareBank 1 Boligkreditt issued the first Nordic green covered bond in Q1 2018. Looking ahead, 146 cities and municipalities have been identified as potential green bond issuers.
- Denmark’s Ørsted issued a €1.25 billion green bond following local government funding agency KommuneKredit’s joining of the market in 2017. Danske Statsbaner, the country’s railways is well placed to issue green bonds in the future. With mortgage bonds representing roughly 80% of all Danish bonds outstanding, property-backed issuance is an area that can be nurtured.
- Iceland’s state utility Landsvirkjun issued the first Icelandic green bond in March 2018. Municipality Credit Iceland, which funds the private sector, is well placed to become a green bond issuer on the strength of its aggregate bond issues, while 16 cities and municipalities including Reykjavik have accessed the debt capital market and could potentially issue green bonds.
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Four of the five Scandinavian countries rank in the global Top 20 for the size and performance of their green bonds.
- Sweden, in 6th position, issued €10.2 billion. Kommuninvest was the largest issuer of green bonds, with 3 totalling €1.5 billion.
- Norway, placed 16th, issued €2.7 billion. Kommunalbanken was the largest issuer, with 13 totalling €1.6 billion.
- Denmark, placed 17th, issued €2.3 billion. Ørsted (formerly Dong Energy), the Danish energy company, was the largest issuer, with two bonds totalling €1.25 billion.
- Finland, placed 20th, issued €1 billion. MuniFin issued three bonds totalling €0.9 billion.
Ann-Charlotte Eliasson, head of Nordic fixed income listings at Nasdaq, told Markets Media in March that she sees an opportunity in listing green bonds. Last year €1.7bn was raised on the Nasdaq Nordic Sustainable Bond Market, up 81% from 2016.
Sustainable bonds can list on the Nasdaq Stockholm main market or the smaller Nasdaq First North Bond Market. To be eligible, issuers need to meet the relevant criteria which Nasdaq has developed in cooperation with Sustainalytics, the producer of environmental, social and corporate governance research.
“In 2015 we launched a specific segment on sustainable bonds to make them more visible,” added Eliasson. “We would like to improve liquidity and we are considering whether an index would help.”
Eliasson explained that Nasdaq is collaborating with Finland to launch a new sustainable bond market this year and has high hopes of launching a segment in Denmark next year.
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