Green Bond Issuance on Track for Record Year

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    Stockholm (NordSIP) – Green bond issuance has broken new records during the first quarter of 2019. SEK Green bond borrowing during the first three months of the year has already surpassed total volume for 2017 and is equivalent to 59% of the total for 2018.

    Total Green bond SEK issuance during the first quarter of 2019 amounted to SEK 41.6 billion. Almost half of these transactions conducted in January. One of the largest transactions was a SEK 6 billion five-year green covered bond from SBAB, the first such security in Sweden. On the same day, Klövern AB and Vasakronan also issued green bonds worth SEK 1 billion and SEK 500 million respectively. Shortly thereafter Advanced Solar Tech Sweden AB (ASAB) followed suit with an inaugural SEK 170 million four-year floating rate secured green bond, according to a press release by SolTech Energy. Among development banks, NIB joined the market with a five-year SEK 2 billion Baltic blue bond earmarked for projects related to wastewater treatment, flood protection and projects aimed at protecting and restoring the marine ecosystems in the region.

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    February saw an aggregate issuance worth SEK 10.2 billion. The most prominent transaction was StoraEnso’s SEK 6 billion three tranches of two- and five-year fixed and floating rate green bonds to finance the purchase of forest land from Bergvik Skog.

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    Source: Bloomberg and Danske Bank

    During March, Kommuninvest contributed almost a third of the monthly volume with the issuance of its first green bond of the year worth SEK 3.5 billion. Sweden’s municipal lender is the country’s largest issuer of green bonds. This was its fourth SEK bond and the sixth bond overall. Under its Green Bonds framework, Kommuninvest uses the proceeds from green bonds to finance Swedish municipal environmental projects. These projects target eight areas of intervention, including renewable energy, energy efficiency, green buildings, public transport, water management and waste management.

    “It’s been a fantastic start to the year for green bonds globally and SEK in particular. With the deal from Kommuninvest, we past SEK 40 billion in green bond issuance, corresponding to 20% of all bonds issued in SEK year to date. In the first quarter of the year the market has exceeded all of 2017’s issuance and it is more than half-way through the record SEK71 billion issued in 2018,” commented Lars Mac Key, Head of DCM Sustainable Bonds at Danske Bank. “If all goes well, the green bond market might grow to SEK 90 billion this year, and potentially, US$ 220-240 billion globally,” the banker added. Danske Bank was one of the most active dealers in the global green bond market, assisting the issuance of 13 transactions so far this year.

    A similar pattern of issuance growth can be discerned in the euro-denominated green bond market, which amounted to € 20.9 billion in the first quarter. Interestingly, neither the EIB nor KfW have come to the green or sustainable bonds. The EBRD launched its debut five-year € 600 million global green bond in the first week of January. Among public borrowers, the Societe du Grand Paris issued € 2 billion in fifteen-year green bonds. Four weeks later, Telefonica conducted its inaugural green bond transaction, the first such euro-denominated transactions from the telecoms industry. The five-year € 1 billion bond that attracted € 5.2 billion in bids. Leaseplan also issued EUR 500 million aimed at financing loans to electrical vehicles, which might open a door to car vehicle financing. Among financials, BBVA borrowed € 35 million through the world’s first blockchain-supported Green Bond in the middle of February. Danske Bank issued a € 500 million green bond at the end of March. Across the pond, the Canada Pension Plan Investment Board borrowed € 1 billion in ten-year Green Bonds to invest in renewable energy. From California, Digital Realty announced it had issued €225 million in green bonds due 2026.

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    Source: Bloomberg and Danske Bank

    Together, the Swedish krona and euro market account for more than half of the total US$ 45 billion borrowing conducted through green bond markets globally. On the domestic front, Fannie Mae borrowed US$ 1.8 billion through 206 relatively small transactions, during January and February. Verizon also came to the market, actually issuing the first telecom green bond with a US$ 1 billion ten-year note that attracted eight times as much demand.

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    Source: Bloomberg and Danske Bank


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    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.
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