Green Bond Review – August 31 – Real Estate Pushes SEK Over 50m Mark

    Stockholm (NordSIP) – This week, we follow up on last week’s upbeat review on the Swedish Krona Green Bond market, as it reached a new milestone with total issuance for 2018 breaching the 50 billion mark. It was the first time such a level of issuance was reached in a single calendar year. Danske Bank’s Lars Mac Key puts the numbers into perspective.

    In 2017, the total green bond issuance in SEK amounted to 38 billion. The SEK market already showed promising results in the first half of the year, but this month, issuance from the real estate companies who have already successfully raised financing in the green bond market, Vasakronan (1.25bn), Fabege (700mn), Svensk Fastighetsförmedling (920mn) as well as first time issuer Willhem (800mn) pushed the total issuance past the 50 billion mark.

    On average over the past few years, the real estate sector accounted for 40 to 55 percent of the total corporate issuance in SEK. In the green bonds segment the sector is even stronger, as real estate corporates stands for approximately 76 percent of all corporate green bonds issued. So far in 2018, real estate corporates comprise about 86 percent of SEK corporate green bonds issued. In EUR, the same figure amounts to barely 6 percent, whereas energy and utility companies represents 78 percent of corporate issuance in EUR.

    Real estate represents 42 percent of green bond use of proceeds by Swedish issuers so far 2018, as municipalities, county councils, financials and Kommuninvest also finance real estate with their green bonds. For the Nordic region the number jumps up to as much as 67 percent, mainly due to the DNB (€1.5bn) and Sparebank 1 (€1bn) covered bonds financing mortgages. Globally the use of proceeds is more diversified, and renewable energy account for 34 percent, real estate 29 percent and transportation 17 percent of the use of green bond proceeds.

    In SEK, all sectors have more than doubled their green bond activities in 2018. Financials showed the most potential for growth, with a tenfold progression compared to the same period in 2017. We should keep in mind, however, that most of the SEK 7.25 billion allocated to the Financial sector belongs to one green covered bond issued by Landshypotek Bank for a total of SEK 5.25 billion.

    Only the Sub-government/Municipalities sector experienced a slow down in its green bond issuance, but this group has shown a low SEK bond activity overall. “We do expect the municipalities to engage in further green bond activities in the remaining of the year as a handful of repeating issuers are in a process to update their green bond platforms,” says Mac Key.

    In 2017, the total issuance of SEK 38 billion represented 6 percent of all SEK bonds issued, the SEK 53 billion issued so far in 2018 corresponds to 11 percent. “Danske Bank’s expectations of SEK 65 to 70 billion of green bond issuance in 2018 still looks valid, with hopes of doubling the level recorded in 2017,” concludes Mac Key.

    Picture available on Pexels

    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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