Investors Rush to Sweden’s Inaugural Sovereign Green Bond

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    Stockholm (NordSIP) – On Wednesday, September 2nd, Sweden issued its first sovereign green bond. The event concluded a process that began last year and saw the Scandinavian government borrow SEK20 billion in ten-year bonds that pay a 0.125% coupon. Revenues from the bond will be used in accordance with the sovereign’s “dark green” bond framework to invest in environmental projects across Sweden.

    According to the transaction summary published by the joint book runners, the ten-year maturity was chosen based on investor demand for a fixed income security at the most liquid point in the Swedish government bond yield curve. Barclays, Danske Bank, NatWest Markets, SEB and Swedbank were the joint lead managers of this transaction.

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    Initial price thoughts were released on the morning of Monday, August 31st, suggested pricing would begin at around 29 basis points (bps) below mid-swaps (MS). However, as the issuance proceeded, pricing tightened by 3bps leading to final pricing of MS -32bps. The bonds were priced at a 100.348 premium, for a re-offer yield of 0.09%.

    As the pricing process indicates, demand was strong with 70 individual investors bidding SEK47 billion as they competed for the opportunity to lend money to the Swedish government. However, most of the demand was domestic, with Swedish investors representing 61.5% of the demand, while its other Nordic neighbours took another 7.2% of the bonds. UK-domiciled investors represented another 17.9%, while the rest of Europe, the Middle East and Africa (EMEA) jointly invested in 8.4% of the securities. Investors from the Americas and Asia purchased the remaining 3.5% and 0.5% of the green bonds, respectively. Sectorally, Pension funds and asset managers were dominant, purchasing 45.6% and 32.9% of the securities, respectively. The remaining 21.5% of the securities were split between insurance companies (8.5%), bank treasuries (8.1%) and other miscellaneous investors (4.9%).

    Alecta was one of the leading investors in this new bond, claiming SEK4.25 billion for itself. Peter Lööw, Sustainability Manager in Asset Management at Alecta, expressed his support for the new issuance noting that through this investment, Alecta was able to further increase its customers’ exposure to green investments with good long-term returns. Carina Silberg, a recently appointed Head of Corporate Governance and Sustainability at Alecta, congratulated the pension fund on its long campaign to get the Swedish sovereign to enter the green bond market.

    “This is the first time Sweden issues a green bond, and the ambition of attracting SEK 20bn makes it the largest green bond in Swedish kronor ever,” Lars Mac Key, responsible for sustainable bonds at Danske Bank, commented earlier in the process. “What differentiates this green bond from other bonds is that investors can follow what government expenditure the bond is linked to and what environmental and climate effects the financing contributes to,” he added.

    “There is clearly a widespread commitment to sustainability in the financial markets, which is gratifying to see. Investors from around the world have shown great interest in our green bond as well as in Sweden’s environmental and climate policy,” says Anna Sjulander, Acting Head of Debt Management at the Debt Office. “Backed by Sweden’s high environmental and climate ambitions coupled with stable public finances, we have been able to offer a low-risk bond with a dark-green stamp of approval. This attracted both our traditional and new investors,” added Johan Bergström, Acting Head of Funding at the Debt Office.

    “Domestic transport currently accounts for one-third of Sweden’s total emissions. A majority of the funds raised from this issuance are thus set to finance maintenance of state transport infrastructure such as railways to significantly reduce the climate impact. It is also an area that has rarely been in focus when other countries have issued Sovereign Green bonds”, says Katya Nolvall, Head of Sustainable Capital Markets at Swedbank. “We’re very happy to be part of the inaugural green issuance by the Kingdom of Sweden. It’s encouraging to see an issuer with already ambitious environmental goals, taking this step and issue a green bond. The issue attracted both domestic, as well as international investor demand resulting in the largest green bond to date from a Nordic SSA”, says Linda Lindblad, Head of SSA Origination at Swedbank.

    Image by Giraffew from Pixabay

    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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